• Calculate the value of one currency in terms of another currency.
• Calculate the exchange rate for linear demand and supply functions.
• Plot demand and supply curves for a currency from linear functions and identify the equilibrium exchange rate.
• Using exchange rates, calculate the price of a good in different currencies.
• Calculate the changes in the value of a currency from a set of data.

You will be given a print copy of the following document to complete:
http://e-conomics.weebly.com/uploads/1/9/1/7/19176587/exchange_rates_hl.pdf

Fixed exchange rates

• Describe a fixed exchange rate system involving commitment to a single fixed rate.

• Distinguish between a devaluation of a currency and a revaluation of a currency.

• Explain, using a diagram, how a fixed exchange rate is maintained.

Managed exchange rates

• Explain how a managed exchange rate operates, with reference to the fact that there is a periodic government intervention to influence the value of an exchange rate.
• Examine the possible consequences of overvalued and undervalued currencies.

Evaluation of different exchange rate systems

• Compare and contrast a fixed exchange rate system with a floating exchange rate system, with reference to factors including the degree of certainty for stakeholders, ease of adjustment, the role of international reserves in the form of foreign currencies and flexibility offered to policy makers

Continue on with the booklet you were given to address the objectives for fixed/managed exchange rates and evaluation of the exchange rate systems (plus see textbook p290-292)

Freely floating exchange rates 

• Explain that the value of an exchange rate in a floating system is determined by the demand for, and supply of, a currency.
• Draw a diagram to show determination of exchange rates in a floating exchange rate system.

• Describe the factors that lead to changes in currency demand and supply, including foreign demand for a country’s exports, domestic demand for imports, relative interest rates, relative inflation rates, investment from overseas in a country’s firms (foreign direct investment and portfolio investment) and speculation.
• Distinguish between a depreciation of the currency and an appreciation of the currency.
• Draw diagrams to show changes in the demand for, and supply of, a currency.
• Evaluate the possible economic consequences of a change in the value of a currency, including the effects on a country’s inflation rate, employment, economic growth and current account balance.

You will be given a copy of this to fill in... but if you lose it then here is one to download and print out...
http://e-conomics.weebly.com/uploads/1/9/1/7/19176587/exchange_rates.pdf

​Trading blocs

• Explain the concepts of trade creation and trade diversion in a customs union.

• Explain that different forms of economic integration allow member countries to gain from economies of scale.

Use p314-316 of textbook plus "Economic Integration" PDF document from last session to meet the objectives listed above.

Monetary union

• Explain that a monetary union is a common market with a common currency and a common central bank.
• Discuss the possible advantages and disadvantages of a monetary union for its members.

​Use p 311-312 Blink/Dorton to complete this page

Use the article "What is meant by Economic Integration?  Is it Efficient within the EU?" to answer the following questions:

1. What is the difference between economic integration that is ‘widening’ and ‘deepening’?
2. Outline the six stages of economic integration and give examples of each (consider: the absence of trade barriers, common external tariff, factor and asset mobility, common currency and common economic policy) … see also diagrams above (p398 Glanville) or p 310 Blink/Dorton
3. Bilateral trade agreements occur between two counties - find examples.  Multilateral agreements occur between many countries, e.g. the trade agreements reached under the WTO are multilateral. Regional trade agreements involves agreement between counties within a geographical region - give examples.
4. Use the examples of NAFTA and the EU to comment on the pros and cons of economic integration.  See also p313D/B; also p518 Welker and  p415/416 Tragakes - see attached document:

http://e-conomics.weebly.com/uploads/1/9/1/7/19176587/economic_integration.pdf​

Case studies:

A customs union in Africa
Video: An end to the banana wars
Bringing NAFTA back home

​

Types of trade protection

• Explain, using a tariff diagram, the effects of imposing a tariff on imported goods on different stakeholders, including domestic producers, foreign producers, consumers and the government.

• Explain, using a diagram, the effects of setting a quota on foreign producers on different stakeholders, including domestic producers, foreign producers, consumers and the government.
• Explain, using a diagram, the effects of giving a subsidy to domestic producers on different stakeholders, including domestic producers, foreign producers, consumers and the government.
• Describe administrative barriers that may be used as a means of protection.
• Evaluate the effect of different types of trade protection.

As HL students you must also meet the following objectives:

• • Calculate from diagrams the effects of imposing a tariff on imported goods on different stakeholders, including domestic producers, foreign producers, consumers and the government.
  • Calculate from diagrams the effects of setting a quota on foreign producers on different stakeholders, including domestic producers, foreign producers, consumers and the government.
  • Calculate from diagrams the effects of giving a subsidy to domestic producers on different stakeholders, including domestic producers, foreign producers, consumers and the government.

You will be given a number of handouts to complete.  You will need to practice drawing and explaining the graphs and also use them to make calculations.

• Describe the objectives and functions of the WTO.

Task 1
Use this document and page 265-266 of textbook to summarize the objectives and functions of the World Trade Organisation (WTO).

Task 2
Use the internet, and in particular ‘The WTO in Brief’ section of the WTO website (www.wto.org), to do the following tasks.

1. How does the WTO help trade flow? ​http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr00_e.htm
2. Briefly outline the agreements re goods, services, intellectual property and dispute settlement. http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr03_e.htm
3. What special provisions are included for developing countries? http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr04_e.htm
4. Look at the 10 benefits of the WTO https://www.wto.org/english/thewto_e/whatis_e/10thi_e/10thi00_e.htm  Which of these are the most important from an economic point of view?
5. What is the focus of the Doha Round? http://wto.org/english/tratop_e/dda_e/dda_e.htm
6. Use the internet to find some alternative, critical views of the WTO.

Task 3
The following document contains competing views of the WTO but they are all mixed up - use annotation or highlighting to distinguish the positive views of the WTO from the criticisms made against the WTO.
http://e-conomics.weebly.com/uploads/1/9/1/7/19176587/wto_advantages_disadvantages.pdf

The benefits of trade

• Explain that gains from trade include lower prices for consumers, greater choice for consumers, the ability of producers to benefit from economies of scale, the ability to acquire needed resources, a more efficient allocation of resources, increased competition, and a source of foreign exchange.

Absolute and comparative advantage (HL only)

• Explain the theory of absolute advantage.

• Explain, using a diagram, the gains from trade arising from a country’s absolute advantage in the production of a good.

• Explain the theory of comparative advantage.

• Describe the sources of comparative advantage, including the differences between countries in factor endowments and the levels of technology.

• Draw a diagram to show comparative advantage.

• Calculate opportunity costs from a set of data in order to identify comparative advantage.

• Draw a diagram to illustrate comparative advantage from a set of data.
• Discuss the real-world relevance and limitations of the theory of comparative advantage, considering factors including the assumptions on which it rests, and the costs and benefits of specialization (a full discussion must take into account arguments in favour and against free trade and protection).

Click here because every country is the best at something!

You'll receive a packet of resources and here is some additional material:
http://e-conomics.weebly.com/uploads/1/9/1/7/19176587/cartoon_macro_excerpt.pdf