What you'll learn
How currencies are valued and why it matters.
Key ideas
- The exchange rate is one currency's price in another, set by demand and supply.
- Appreciation (stronger) makes exports dearer; depreciation (weaker) makes imports dearer.
- Floating vs fixed exchange rates.
Exam tips
- Use the SPICED/WPIDEC rule for effects on trade.
- Distinguish floating from fixed rates.
Common mistakes
- Confusing appreciation and depreciation.
- Mixing up the effect on exports vs imports.