Syllabus: OCR - GCSE Economics
Module: 4. International Trade and the Global Economy
Lesson: 4.3 Exchange Rates

Introduction

Exchange rates might feel abstract on first contact, but they underpin everything from the cost of imported trainers to decisions on exporting British cheese to Europe. In OCR’s GCSE Economics specification (J205), this topic sits within the wider theme of international trade and the global economy. It provides students with the tools to understand how exchange rates influence trade flows, inflation, competitiveness, and employment.

This lesson links tightly with the OCR GCSE aim to build critical economic reasoning and analytical skills in real-world contexts. Teachers are encouraged to explore not just the theory but its dynamic application to recent global events.

Key Concepts

According to the OCR GCSE Economics syllabus, learners should be able to:

• Define an exchange rate and understand how it is expressed (e.g. £1 = €1.15).

• Explain the difference between appreciation and depreciation of a currency.

• Analyse the effects of changes in exchange rates on:

  • Prices of imports and exports.

  • The UK balance of payments.

  • UK businesses and consumers.

• Understand how exchange rates can influence demand for UK exports and imports, employment in export-focused sectors, and consumer prices.

Students are expected to interpret exchange rate changes through both qualitative discussion and data-based tasks.

Real-World Relevance

The volatility of the British pound post-Brexit, the economic impacts of COVID-19, and recent Bank of England interest rate decisions offer concrete examples of currency fluctuations in action.

Mini Case Example:

In 2022, the pound fell sharply against the dollar following government budget announcements. For UK importers buying goods in dollars, such as tech retailers or oil companies, this meant higher costs. Meanwhile, British manufacturers selling to US buyers saw their goods become more competitively priced overseas.

Activities like tracking currency values over a week and relating them to real-world news headlines can bring this topic to life.

How It’s Assessed

OCR typically assesses this content in Component 02 (National and International Economics), through a mix of structured and extended response questions.

Key command words include:

• Explain – show understanding of a concept like appreciation through an example.

• Analyse – explore chain effects, e.g. how depreciation might boost exports but raise import costs.

• Evaluate – balance effects on different stakeholders such as exporters, consumers, or the government.

Students may be asked to:

• Interpret exchange rate graphs or tables.

• Link currency changes to trade balances.

• Make supported judgments about policy or business decisions in response to currency shifts.

Enterprise Skills Integration

Exchange rates offer a rich context for developing decision-making and problem-solving skills. With Enterprise Skills simulations, students can be placed in the shoes of a UK business choosing export markets or sourcing products internationally.

Example Simulation Scenario:

Students manage a UK fashion brand and must decide whether to import from Europe or Asia, factoring in current exchange rates and price volatility. They debate, decide, and then see the consequences play out across profit, sales, and customer satisfaction.

This kind of active learning develops:

• Critical thinking: weighing risk and return.

• Numeracy: analysing percentage changes in currency values.

• Communication: justifying strategic decisions under uncertainty.

Careers Links

This topic offers natural links to:

• International business

• Economics and finance

• Import/export logistics

• Public policy and government economics

Mapped to Gatsby Benchmarks:

• Benchmark 4: Linking curriculum learning to careers (e.g. export manager, currency analyst).

• Benchmark 5: Encounters with employers (use alumni or local business case studies).

• Benchmark 6: Experiences of workplaces (through simulations or shadowing in logistics or finance).

Careers Leads can use this lesson to highlight how global economic trends shape job roles students might not have considered.

Teaching Notes

Top teaching strategies:

• Start with a ‘What if?’: What if the pound drops by 10% overnight?

• Use interactive currency converters in real-time.

• Bring in real exchange rate graphs for interpretation tasks.

• Pair students for role-play activities as importers/exporters.

Common pitfalls:

• Students often confuse appreciation with depreciation. Anchor each term with a visual (e.g. a stronger pound means £1 buys more).

• They may overlook secondary effects—like how consumers are affected indirectly by business decisions.

Extension tasks:

• Compare the UK with another country (e.g. Japan or Turkey) to explore differences in currency policy.

• Explore fixed vs floating exchange rates with a mini-debate.

Resources that work:

• Enterprise Skills simulations for decision-making practice.

• Skills Hub tools for low-prep, syllabus-aligned activities with exam-style application.