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3. (a) Explain what is meant by the term 'Exchange rate' - Leaving Cert Business - Question 3 - 2010
Question 3
3. (a) Explain what is meant by the term 'Exchange rate'. (b) Outline two impacts on Irish Exporters to the UK market, if the euro (€) increases in value relative t... show full transcript
Worked Solution & Example Answer:3. (a) Explain what is meant by the term 'Exchange rate' - Leaving Cert Business - Question 3 - 2010
Step 1
Explain what is meant by the term 'Exchange rate'
Answer
The term 'exchange rate' refers to the price at which one currency can be exchanged for another. It signifies the value of one country's currency in terms of another currency. Essentially, it allows for the conversion of currencies, facilitating international trade and investment.
Step 2
Outline two impacts on Irish Exporters to the UK market, if the euro (€) increases in value relative to the UK pound sterling (£)
Answer
(i)
If the euro becomes more valuable compared to the pound sterling, Irish exports to the UK are likely to become more expensive. This means that UK customers will find it costlier to purchase Irish products, which might lead to a decrease in demand for these goods.
(ii)
Additionally, the increased value of the euro could squeeze profit margins for Irish exporters. As the cost of exporting goods rises, firms may either experience lower profits or need to adjust their prices, which could affect their competitiveness in the UK market.