Podcast
Questions and Answers
What happens to eurozone exports to the UK when the sterling weakens?
What happens to eurozone exports to the UK when the sterling weakens?
- They become cheaper and demand increases
- They are no longer exported to the UK
- They become more expensive and demand falls (correct)
- They remain unchanged and demand stays the same
What is the effect of a weakening sterling on UK imports to the eurozone?
What is the effect of a weakening sterling on UK imports to the eurozone?
- They remain unchanged and demand stays the same
- They become more expensive and demand falls
- They are no longer imported to the eurozone
- They become cheaper and demand rises (correct)
What happens to tourism to Ireland from the UK when the sterling weakens?
What happens to tourism to Ireland from the UK when the sterling weakens?
- It remains unchanged as the sterling has no effect on tourism
- It increases as it becomes cheaper for British tourists to visit Ireland
- It becomes impossible for British tourists to visit Ireland
- It decreases as it becomes more expensive for British tourists to visit Ireland (correct)
What is the effect of a weakening sterling on tourism to the UK from Ireland?
What is the effect of a weakening sterling on tourism to the UK from Ireland?
What is the financial incentive for those living in the South of Ireland to travel to the North of Ireland?
What is the financial incentive for those living in the South of Ireland to travel to the North of Ireland?
What was the exchange rate for an Irish tourist traveling to the UK in early 2019?
What was the exchange rate for an Irish tourist traveling to the UK in early 2019?
What is the definition of the exchange rate?
What is the definition of the exchange rate?
What is the primary motivation of currency speculators?
What is the primary motivation of currency speculators?
What would attract hot money from the eurozone to the US?
What would attract hot money from the eurozone to the US?
What is the effect of quantitative easing by the ECB on the euro?
What is the effect of quantitative easing by the ECB on the euro?
What contributes to changes in exchange rates?
What contributes to changes in exchange rates?
Why do currency speculators buy and sell currencies?
Why do currency speculators buy and sell currencies?
Study Notes
Implications of a Weakening Sterling on the Irish Economy
- A weakening sterling leads to a decline in eurozone exports to the UK, as they become more expensive, resulting in reduced demand.
- Conversely, UK imports to the eurozone increase, as goods from the UK become cheaper, leading to higher demand.
Impact on Tourism
- The weakening sterling makes it more expensive for British tourists to visit Ireland and other European countries, resulting in a decrease in British tourists visiting Ireland.
- In contrast, it becomes cheaper for Irish and other eurozone tourists to visit the UK, leading to an increase in tourism to the UK.
Cross-Border Shopping
- A weakening sterling creates a financial incentive for those living in the South of Ireland to travel to the North of Ireland to purchase items.
Foreign Exchange and Exchange Rates
- The exchange rate is the price of one currency in terms of another.
- In early 2019, the exchange rate for an Irish tourist traveling to the UK was €1.00 = 90 pence.
- In early 2019, the exchange rate for a British tourist traveling to the eurozone was 1 British pound = €1.11.
Factors Affecting Exchange Rates
- Currency speculation contributes to changes in exchange rates as speculators buy and sell currencies to make a profit, influencing demand and supply.
Interest Rates and Exchange Rates
- Higher interest rates in a country, such as the US, compared to another, like the eurozone, attract money flows from the latter to the former, impacting exchange rates.
- Hot Money: Capital that moves between financial institutions to take advantage of higher interest rates.
Quantitative Easing and Exchange Rates
- Quantitative easing by a central bank, such as the ECB, increases the money supply, making the currency (e.g., EUR) cheaper and affecting exchange rates.
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Description
This quiz assesses the effects of a weakening British sterling on the Irish economy, including its influence on exports, imports, and tourism. It covers the consequences of a devalued sterling on trade and travel between Ireland and the UK.
