Syllabus: SQA - Higher Course Spec Economics
Module: Global Economic Activity
Lesson: Exchange Rates

Introduction

The SQA Higher Economics course explores the workings of the global economy and how key economic variables, like exchange rates, affect countries, consumers and businesses. This topic sits within the “Global Economic Activity” unit of the Higher Economics specification and equips students to interpret real-world issues like trade flows, currency fluctuations and government policy impacts.

Understanding exchange rates isn’t just about memorising definitions — it’s about applying economic reasoning to contemporary problems. From how a strong pound affects Scottish exporters, to why a fall in the euro matters for UK tourism, this topic builds essential economic thinking for real-world decision making.

Key Concepts

The SQA Higher Economics syllabus outlines the following core learning points under exchange rates within Global Economic Activity:

• Definition of exchange rate: The value of one currency in terms of another.

• Types of exchange rates:

  • Floating: Determined by market forces.

  • Fixed: Pegged to another currency.

  • Managed/Hybrid: Combination of both.

• Determinants of exchange rates:

  • Interest rates

  • Inflation

  • Balance of payments

  • Speculation

  • Government intervention

• Impact of currency appreciation/depreciation:

  • On exports/imports

  • On inflation and economic growth

  • On business costs and consumer prices

• Exchange rate regimes and policy responses:

  • Central bank intervention

  • Use of reserves or interest rate changes

These concepts form the foundation for interpreting global trade patterns, competitive advantage and economic stability.

Real-World Relevance

Currency markets are constantly in flux — and the ripple effects are felt in real time.

• Case Study: Post-Brexit Pound Volatility
  Following the Brexit referendum in 2016, the British pound dropped sharply, making UK exports cheaper abroad but increasing import costs. This had implications for inflation and consumer prices.

• Recent Example: UK Interest Rate Hikes (2022–2023)
  As the Bank of England raised interest rates to combat inflation, the pound strengthened against the euro and dollar. This helped reduce imported inflation but created pressure on export competitiveness.

• Scottish Business Context:
  Whisky exporters benefit when the pound is weak, making their products more competitively priced abroad. Meanwhile, importers of energy or tech goods may face rising costs with a weaker currency.

These examples bring the classroom theory into focus, offering students a lens on how global shifts affect local economies.

How It’s Assessed

In the SQA Higher exam, this topic is typically assessed through:

• Data-response questions:
  Students analyse currency data or news articles and apply economic reasoning.

• Short-answer questions:
  Definitions or explanation of currency impacts on trade or inflation.

• Essay-style questions:
  Often require evaluation of government responses to currency fluctuations or discussion of exchange rate regimes.

Command words to watch:

• Explain: Outline and give reasons.

• Analyse: Break down, use logical reasoning.

• Evaluate: Weigh up pros and cons, provide judgement.

Students are expected to demonstrate both knowledge and application — using diagrams, real examples and policy awareness to support their responses.

Enterprise Skills Integration

Teaching exchange rates offers a strong entry point to developing essential enterprise skills:

• Problem-solving:
  Students interpret causes and effects of currency changes on business and the wider economy.

• Decision-making:
  Simulated trade scenarios or business simulations can challenge students to choose pricing or sourcing strategies based on currency shifts.

• Commercial awareness:
  Understanding currency dynamics builds students’ ability to assess market conditions — a key skill for future entrepreneurs or managers.

Using Enterprise Skills’ Business Simulations, learners can be dropped into real-time trading decisions where exchange rates directly influence performance — making the learning active and memorable.

Careers Links

This topic connects directly to multiple career pathways and aligns with Gatsby Benchmarks 4, 5 and 6:

• Finance: FX traders, analysts, and central bank economists.

• International Business: Import/export managers, supply chain analysts.

• Tourism and Hospitality: Understanding how currency affects visitor numbers and pricing.

• Policy and Public Sector: Civil servants analysing economic indicators or advising on trade policy.

Discussing live roles and using job spec extracts during lessons helps demystify the abstract and connect curriculum to careers.

Teaching Notes

Here are practical strategies for delivering this topic effectively:

• Anchor with a local angle: Use Scottish exporters or importers to personalise the impact of exchange rates.

• Visualise movement: Currency charts over time (e.g. GBP/USD or GBP/EUR) can help students spot trends and triggers.

• Integrate news: Weekly exchange rate updates can form part of a starter task or plenary.

• Misconceptions to tackle:

  • A stronger pound is not always better.

  • Governments can’t fully control floating exchange rates.

• Extension activity:
  Use Enterprise Skills’ Business Simulation to simulate international trading decisions under different exchange rate scenarios.

Built for real classrooms and backed by measurable impact, this approach keeps lessons focused, plug-and-play, and engaging — without adding to your workload.