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This lesson we will be learning about 1.5 – Exchange Rates

This lesson we will be learning about 1.5 – Exchange Rates. NO IDEA I NEED HELP NEVER HEARD OF IT. OK I CAN DO THIS WITH SUPPORT SOME GUIDANCE NEEDED NEARLY AT MY TARGET. GOT IT! VERY CONFIDENT WILL HIT MY TARGET GRADE. EXCEED TARGET. LEARNING OBJECTIVES

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This lesson we will be learning about 1.5 – Exchange Rates

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  1. This lesson we will be learning about1.5 – Exchange Rates

  2. NO IDEA I NEED HELP NEVER HEARD OF IT OK I CAN DO THIS WITH SUPPORT SOME GUIDANCE NEEDED NEARLY AT MY TARGET GOT IT! VERY CONFIDENTWILL HIT MY TARGET GRADE EXCEED TARGET LEARNING OBJECTIVES Investigate the effects of exchange rates on business

  3. Starter Article Teenager makes £100 profit from the euro! • What is an exchange rate? • What is an import? • What is an export?

  4. Theory Exchange rates ‘how much of one currency can be exchanged for another’ Export: the sale of a good or service to a foreign buyer that leads to a flow of money into the UK. The foreign buyer will exchange their currency into pounds to complete the purchase. Import: is the purchase of a good or service from a foreign business that leads to a flow of money out of the UK. The UK buyer will exchange their currency into the sellers currency.

  5. EXCHANGE RATESHow much of one currency can be exchanged for another EXPORTS (Sells) Hungary Tesco's will be expected to be paid in…

  6. ON THE OTHER HAND….. IMPORTS (Buys) France Tescos will have to pay in…

  7. The exchange rate between euros and pounds will affect Tescos 10 euros = 1 pound If the exchange rate is: This means that if you want to change £1 into euros you will get … €10 €1000 Therefore... a £100 case of wine will cost? £100 x 10 (calculation)

  8. Can you work out the price of the following products if the exchange rate is10 CYN (Chinese Yuans) to 1 GBP (£1) • Porcelain dolls bought in from China at 100,000 CYN. • Wool shipped to China for £30,000 Extension Task – If the value of the pound improves will this benefit UK businesses which import or export? Justify your answer Discussion point: What do we mean when we talk about the value of the pound?

  9. Can you work out the price of the following products if the exchange rate is10 CYN (Chinese Yuans) to 1 GBP (£1) • Porcelain dolls bought in from China at 100,000 CYN. ANSWER: 100,000 / 10 • Wool shipped to China for £30,000 ANSWER: 30,000 x 10 Discussion point: What do we mean when we talk about the value of the pound?

  10. HOWEVER… 6 months later, the exchange rate changes… the value of the pound drops!!!!! This means that it is worth? (What do we think? more or less Euros) LESSIt has gone down to 9 Euros from 10 Euros, the case of wine for £100 is now worth… €900 What affect will this have on Tesco’s when they buy their wine from France? How will this effect you as the customer? Extension task...What affect will this have on the wine producer in France?

  11. IMPACT LOW £ Value of the pound is less HIGH £ Means that the £ is worth more • Foreign purchasers may buy more British goods or services as they are cheaper to them (exports). • It will cost British companies more to import goods and services. • Britain will sell more exports • Britain will buy fewer imports • Foreign purchasers (buyers) will not be able to afford British goods/services • British companies will be able to import goods and services more cheaply • Britain will sell less exports. • Britain will buy more imports. • Effect on Tesco’s? • Effect on Customers?

  12. Exchange Rates WALT – Investigate the effects of exchange rates on business WILF ALL - Define and Describe ‘Exchange Rates’, ‘Imports’ and ‘Exports’ -Be able to calculate prices of products using exchange values - Identifyat least 2 examples of effects that are a result of a low £ - Identify at least 2 examples of effects that are a result of a high £ MOST (Target grade C or above)- Describe the effects of exchange rates on UK business SOME (Target grade B or above)- Discuss the impact upon other businesses and customers CONFIDENCE CHART – WHERE ARE YOU? 1 23 4 56 7 8

  13. S.P.I.C.E.D. • A Good way to remember the effect of the change of exchange rates is.. STRONG POUND = IMPORTS CHEAPER, EXPORTS DEARER

  14. Activities • Test Yourself – P126 • Over To You P127 Students look at a case study in the Edexcel GCSE Business Studies Student Book Introduction to Small Business on a frozen food manufacturer, examining how changes in the value of the pound can affect the business, and evaluating the extent of this effect ALL – Q 1 and 2 MOST – Q3 SOME – Q4

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