The advantages and disadvantages of fixed and floating exchange rate systems
A fixed exchange rate gives businesses certainty but removes a government's freedom to adjust the rate. A floating exchange rate adjusts automatically to economic conditions but can create unpredictable swings in value.
Real World
After Brexit, the pound fell roughly 15% against the dollar, making UK exports cheaper abroad but raising import costs for British businesses buying components from the EU.
Exam Focus
Distinguish clearly between fixed and floating in your opening definition — examiners deduct marks for conflating the two systems.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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