3.2 exchange rates

Watch the video below and answer the following questions.

• What is happening to Sterling (the pound)?

• What is the usual relationship between the BoP and exchange rates?

• Does the data for most countries back this up?

• Why might you explain the rise in Sterling?

• What may the effects of the appreciation be?

Big Mac Index- how exchange rate changes should bring about Purchasing Power Parity, but often don't !

Another Economist article on PPP