Objective: This activity aims to help IB economics students analyse the reasons behind exchange rate changes between fictional countries and currencies. Students will identify the factors affecting the exchange rate, draw exchange rate diagrams, and perform calculations using the given exchange rate information.
Case Study 1: The exchange rate between the Hilaria Dollar (H$) and the Jocupee Jingle (J¢) recently changed from 1 H$ = 5 J¢ to 1 H$ = 7 J¢ due to a significant discovery of natural resources in Hilaria, which attracted foreign investors.
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Case Study 2: The exchange rate between the Chucklia Crown (C¥) and the Giggland Guilder (G£) changed from 1 C¥ = 10 G£ to 1 C¥ = 8 G£ as a result of a recent increase in interest rates in Giggland, leading to capital inflows.
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Case Study 3: The exchange rate between the Grinia Groat (G₲) and the Lolloco Lira (Lℓ) shifted from 1 G₲ = 4.7 Lℓ to 1 G₲ = 2.9 Lℓ following a period of political instability in Grinia, causing domestic investors to move their capital abroad.
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Case Study 4: The exchange rate between the Ribley Rumble (R฿) and the Snickerston Snickel (S₴) changed from 1 R฿ = 12.5 S₴ to 1 R฿ = 15.3 S₴ due to Ribley’s central bank intervening in the foreign exchange market to buy large amounts of Ribley Rumbles.
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Case Study 5: The exchange rate between the Tickletoe Taler (T₸) and the Whoopee Won (W₩) shifted from 1 T₸ = 24.6 W₩ to 1 T₸ = 19.8 W₩ after a rapid increase in imports in Tickletoe due to a surge in consumer spending, causing a higher supply of Tickeltoe Talers in the foreign exchange market.
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