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6.3. Foreign exchange rates

Syllabus
0455–2027–2028
Topic
6.3
Level
—

6.3.1—Definition of foreign exchange rate

  • Definition of foreign exchange rate

6.3.2—Reasons for buying and selling foreign currencies

  • trade in goods and services
  • speculation
  • government intervention in currency markets
  • payment of profit, interest and dividends between countries
  • workers’ remittances
  • investment in capital goods between countries

6.3.3—Determination of foreign exchange rate in foreign exchange market

  • definitions of floating exchange rate, appreciation and depreciation
  • the demand for and supply of a currency
  • the determination of the equilibrium foreign exchange rate
  • causes of foreign exchange rate fluctuations
  • changes in demand for exports and imports
  • changes in the interest rate
  • speculation

6.3.4—Consequences of changes in foreign exchange rates

  • effects of changes in foreign exchange rates on prices and demand for exports and imports

Objective notes

4 learning objectives
ConceptIGCSE Economics