Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can define the exchange rate as the price of one currency in terms of another. (Guide: “What an exchange rate is”)
- I can define appreciation and depreciation, and explain why one currency’s appreciation is the other’s depreciation. (Guide: “Appreciation and depreciation”; Practice Q2)
- I can explain that, in a flexible system, a currency’s value is set by people buying and selling it for trade and for assets. (Guide: “How currencies are valued relative to one another”; Practice Q6(e))
Calculation
- I can turn a rate quoted as KS per VD into VD per KS using the reciprocal. (Guide: “Two ways to quote the same rate”; Practice Q1, Q6(a))
- I can convert a price from one currency into another, using units to decide whether to multiply or divide. (Guide: Worked example 2; Practice Q3, Q5(a), Q6(d))
- I can calculate the percentage change in each currency’s value, using each currency’s own price. (Guide: Worked examples 1 and 3; Practice Q4, Q5(c), Q6(c))
- I can find the rate between two currencies from their rates against a third. (Practice Q7(a)–(b))
Reasoning
- I can decide which currency appreciated from a change in the rate, however the rate is quoted. (Guide: Figure 1; Practice Q2, Q6(b))
- I can explain why a 25% appreciation of one currency is a 20% depreciation of the other. (Guide: Worked example 1; Practice Q4)
- I can explain how a change in the exchange rate changes what a good costs a foreign buyer when its home price stays the same. (Guide: Worked example 2; Practice Q5, Q7(c))
All ticked? Move on to Topic 6.3, The Foreign Exchange Market, or return to the course roadmap.