Evaluate the possible impact on UK macroeconomic performance of a sustained rise in the value of the pound sterling against the euro and the US dollar

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be possible to increase production without encountering an increase in costs. In addition, firms will not require an extreme abundance of stuff, therefore may cut back and promote unemployment, once again, damaging the macroeconomic performance. Individuals will not have less purchasing power and disposable income to inject in the circular flow of income. This will all accumulate and cause a decrease in the total output, expenditure of consumers or income of an economy which will cause a reduction in real GDP growth after adjusting for changes in the price level. Evidently, this will have a unfavourable impact on economic growth which is a key indicator of macroeconomic performance. However, the extent to which this is a problem depends on the price elasticity of demand for exports. If the demand for exports is price elastic an appreciation of the exchange rate will lower the value of exports, which in turn will reduce AD, economic growth and employment.

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