Tuesday, June 28, 2016

Brexit offers an opportunity for a short FOREX lesson.

The British Pound Sterling has taken a beating in the span of a few short days.  It went from about $1.46 (at times higher) to a low of $1.32.

Much of the commentary has been about holders of Pounds fleeing the currency and into a "safehaven". This means they are exchanging Pounds for other currencies in order to (1) hold cash in that currency or (2) purchasing a safe(r) asset with that currency (gold, bonds, etc).

The Foreign Exchange Market is a big part of the AP Macroeconomics curriculum.  It is one of the harder things to teach and I think one of the more difficult things for students to grasp.  After all, it is not something we routinely encounter in daily life BUT it does make its presence known in all facets of our economic lives.

Below I put together some slides illustrating a part of what happened with "BREXIT" in the UK and how students should understand the graphing elements as it pertains to an AP Macro class.

Hope it helps!!!

NOTE: The next slide has a typo.  Should be "RECIPROCALS".  Thanks.

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