Floating Exchange Rate
Market-determined exchange rate; fluctuates based on supply/demand.
Real World
The pound's 15% drop against the dollar in 2022 made UK exports like Burberry goods cheaper for US buyers, boosting overseas sales revenue when converted back to sterling.
Exam Focus
Use the mnemonic SPICED (Strong Pound: Imports Cheap, Exports Dear) to quickly frame exchange rate effects in answers.
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