A falling currency and its impact.

With the falling value of the UK Pound here is a mindmap on the impact of a weaker currency. What seems to have caused this is the UK government’s decision to make tax cuts, which are to be paid for by higher government borrowing. On hearing this news investors appear to have dumped UK pounds fearing further instability in the UK economy.

The weak pound is a chance to stimulate exports although it has meant more expensive imports of oil and food – UK imports 50% of its food. This will put further pressure on inflation which in turn may also force the Bank of England to increase interest rates.

Source: CIE A Level Revision – Susan Grant

For more on exchange rates view the key notes (accompanied by fully coloured diagrams/models) on elearneconomics that will assist students to understand concepts and terms for external examinations, assignments or topic tests.