Economics A-Level
Exchange rates
What Exchange rates means in Economics A-Level, as defined for AQA.
Definitions of Exchange rates
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Reference: AQA
Changes in these directly influence aggregate demand through net exports, with a depreciation making UK exports more price competitive abroad and imports more expensive domestically.
A practical application used to explain sudden changes in a country's net export position, as a depreciation of the pound makes exports cheaper and imports dearer.
Determined in the foreign exchange market, where different national currencies are traded against one another.
The value of a currency, which can be manipulated to correct a balance of payments deficit or surplus.
Topics that use Exchange rates
- Central banks and monetary policy (AQA A-Level)
- The balance of payments (AQA A-Level)
- The determinants of aggregate demand (AQA A-Level)
- The structure of financial markets and financial (AQA A-Level)
Related terms
- Aggregate demand
- Hot money flows
- Interest rates
- Investment
- Macroeconomic objectives
- Balance of payments
- Broad money
- Capital account
Using Exchange rates in the exam
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