Effect of changs in Exchange rate EXR

1. Appreciation (SPICED)

1.1. Strong Pound

1.1.1. Imports Cheap Exports Dear

1.1.1.1. Opportunities

1.1.1.1.1. Lower cost of RM

1.1.1.1.2. Lower inflation

1.1.1.1.3. Consumers benefit

1.1.1.1.4. Higher efficiency to

1.1.1.2. Threats

1.1.1.2.1. Increase in local competition

1.1.1.2.2. exports < imports

2. Depreciation (WIDEC)

2.1. Weak £

2.1.1. Imports Dear Exports Cheap

2.1.1.1. Opportunities

2.1.1.1.1. exports > imports

2.1.1.1.2. Increase in employment

2.1.1.2. Threats

2.1.1.2.1. Increase RM cost

2.1.1.2.2. Higher inflation

3. For Evaluation points (AO4) It depends on

3.1. How dependent an economy is on exports vs imports

3.2. PED of demand

3.2.1. Higher elasticity means higher response on revenues

3.3. Protectionist Policies

3.3.1. Restrict the benefits of Weak EXR if there are restrictions on your goods (remember China vs US)