Environmental and Economic - Q4 Support
In this question you need to explain how currencies and exchange rates can affect both your businesses. This is particulary relevent if your business sells or buys goods from abroad.
| Exchange rate | Prices (for those buying abroad) | Prices (for businesses buying from abroad) |
| Appreciates i.e. | ||
| 2006: £1 = €1 | ||
| 2007: £1 = €1.5 | Increase | Fall |
| Depreciates i.e. | ||
| 2006: £1 = €1 | ||
| 2007: £1 = €0.8 | Fall | Increase |
Use the table to describe what would happen to both your businesses - for Customer, Supplier and Business.
Model Answer:
If the exchange rate was to increase Taylors Ltd. would be able to purchase supplies from abroad cheaper than before the rise. This is good news for Taylors as this would reduce their costs which could lead to enhanced profits. Unfortunatly, for customers buying from Taylors in Germany, they would now have to pay more for the goods due to the rise in interest rates. This could mean Taylor's make fewer sales in the future as goods have now become too expensive for them and customers might go elsewhere in the future.
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