Economics · Unit 4: The global economy

EC4.5 — Exchange rates

Economics · SL / HL · syllabus-mapped notes

1. EC4.5.1

   Floating exchange rates

   Explain how a floating exchange rate is determined by the demand for and supply of a currency.

2. EC4.5.2

   Changes in demand and supply for a currency, factors including:

   Explain what shifts the demand for and supply of a currency, from trade flows to investment and speculation.

3. EC4.5.3

   Consequences of changes in the exchange rate on economic indicators, such as:

   Evaluate what a change in the exchange rate does to inflation, growth, unemployment, the current account and living standards.

4. EC4.5.4

   Fixed exchange rate

   Explain how a fixed exchange rate is maintained, and distinguish devaluation from revaluation.

5. EC4.5.5

   Managed exchange rates

   Explain managed exchange rates, and what it means for a currency to be over- or undervalued.

6. EC4.5.6

   Fixed versus floating exchange rate systems

   Evaluate fixed against floating exchange rate systems.