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    For example if the exchange rate of £ to US Dollars was 1:1, but then changed to £1:2 USD

    Which currency has got stronger? And what does this mean for trade between UK & USA, In terms of do imports/exports get cheaper/ more expensive

    Any help would be much appreciated, Thanks
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    (Original post by Sam.T.)
    For example if the exchange rate of £ to US Dollars was 1:1, but then changed to £1:2 USD

    Which currency has got stronger? And what does this mean for trade between UK & USA, In terms of do imports/exports get cheaper/ more expensive

    Any help would be much appreciated, Thanks
    Pound has become stronger, you can now buy more with the pound.

    A stronger pound means imports will become cheaper while exports will become more expensive. You can use the acronym “SPICED” to remember this, Strong Pound Imports Cheaper Exports Dearer

    This will in theory mean Demand for Imports will rise while the Demand for exports will fall. This however depends on if the Marshall Lerner condition is being met but I am not sure what level you are at and so if you need to know this.
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    Think of SPICED (strong pound imports cheaper exports dearer)
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    (Original post by GCSE2016Troop)
    Pound has become stronger, you can now buy more with the pound.

    A stronger pound means imports will become cheaper while exports will become more expensive. You can use the acronym “SPICED” to remember this, Strong Pound Imports Cheaper Exports Dearer

    This will in theory mean Demand for Imports will rise while the Demand for exports will fall. This however depends on if the Marshall Lerner condition is being met but I am not sure what level you are at and so if you need to know this.
    Thank You for the response,

    I’m currently at GCSE level, but will be taking A-Level Economics.

    By demand, do We mean the UK’s demand for imports/exports or the USA’s demand for imports/exports.

    Also how would the new exchange rate affect a US company that operates in the UK, therefore need to exchange their profits from pounds to sterling’s, will they get more profit or less?

    Thank you x
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    (Original post by Sam.T.)
    Thank You for the response,

    I’m currently at GCSE level, but will be taking A-Level Economics.

    By demand, do We mean the UK’s demand for imports/exports or the USA’s demand for imports/exports.

    Also how would the new exchange rate affect a US company that operates in the UK, therefore need to exchange their profits from pounds to sterling’s, will they get more profit or less?

    Thank you x
    Oh well the Marshall Lerner condition and exchanges rates in more detail doesn’t come till A2 Economics so don’t worry.

    It would be the UKs Demand for Imports/exports as it is the pound that has gotten stronger.

    I’m going to assume you meant exchange pounds to dollars? In that case they would get more because as I said before the pound has gotten stronger and therefore can buy more, in this case, dollars.
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