Exchange rate systems and determination, the effects of changes, and the balance of payments.
Exchange rates
The price of one currency in terms of another. In a floating system, it's set by supply and demand for the currency; in a fixed system, the central bank maintains a set rate.
- Appreciation (currency rises): exports dearer, imports cheaper → SPICED (Strong Pound = Imports Cheap, Exports Dear).
- Depreciation (currency falls): exports cheaper, imports dearer → may improve the current account (WPIDEC).
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