Exchange Rates

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.

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