Following Teresa May's Brexit speech, the UK exchange rate in terms of euros depreciated from 1.13 to 1.08. If a firm sells 20000 units at 4 euros per unit, what is the difference in the firms revenue following the change in the exchange rate?

Total sales abroad: 20000 x 4 euros = 80000 euros Pound amount = Euro amount x ER Before ER change: 80000 x1.13 =90400 pounds After ER change: 80000 x 1.08= 86400 pounds 864-904 = -4000 pounds Therefore, revenues abroad have decreased by £4000 because of the depreciation in the ER! **You could also simply look at the depreciation of 0.05 x 80000 (total revenue) = £4000 for a quicker method!

JR
Answered by Josh R. Economics tutor

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