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Business Studies IGCSEPDF 196
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Summary Table
Change
Exporters
Currency Appreciation:
Whenacurrency rises in value relative to another.
●
Exports become more expensive → bad for exporters.
●
Imports become cheaper → good for importers.
Importers
Example: If $1 falls from €0.83 to €0.70, American goods become cheaper in
Europe — boosting US exports.
Example: If €1 rises from $1.20 to $1.50, European goods become costlier for
Americans, but European firms can import US goods for fewer Euros.
Currency Depreciation:
Whenacurrency falls in value relative to another.
●
Exports become cheaper → good for exporters.
●
Imports become more expensive → bad for importers.
Overall Effect
The exchange rate is the price of one currency in terms of another — i.e., how much of
one currency you need to buy another.
Example: €1 = $1.20 means 1 Euro can buy 1.20 US Dollars.
Exchange rates change due to demand and supply of currencies:
● Ifdemand for a currency rises → its value appreciates.
● Ifdemand falls or supply increases → it depreciates.