Discuss How Each Topic Played A Role Writing Assignment

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1.0 BREXIT SUMMARY
The word Brexit is coined from two words, Britain and Exit. When coined together, the two words refer to Britain’s exit from the European Union. According to Dhingra & Sampson (2016), Brexit is a portmanteau of two English words namely Britain and Exit. It was coined specifically as short form referring to Britain’s exit from the European Union prior to the exit referendum in which Britain voted for exit from European Union. The Brexit proponents’ argument was that exiting from the EU was necessary for purposes of protecting Britain’s identity, culture and independence particularly referring to the EU’s impact on immigration (Horton, 2016). On the contrary, those who advocated for Britain’s continued membership argued that EU membership was an important factor for Britain’s continued economic stability and performance. They argued that immigration issues were insignificant as compared to the economic impact of exiting the union. The advocates of Brexit argued that Britain’s exit was necessary since Britain’s culture was threatened by EU’s immigration policies. The immigration issue played a pivotal role in the Brexit debate as the opponents argued that Britain was gradually losing its national identity and culture and thus an overhaul of the immigration policies was needed. A pre-Brexit survey indicated that over 75% of Britons wanted the immigration policies reviewed, while another 56% stated that there was an urgent need for the reduction of the immigration policies (Reader, 2016). Although the proponents of Brexit argued that immigration was good for trade and currency stability, their argument that Britain’s exit would be disastrous did not win.
2.0 FACTORS THAT INFLUENCE EXCHANGE RATE
First and foremost, the exchange rates are affected by changes in the inflation rates. Thus lower inflation rates causes currency appreciation while an increase in inflation rates causes a decline in the currency exchange rates (Chan, Tse & Williams, 2011). Subsequently, commodity prices remain relatively stable when the inflation rates are low. In a nutshell, when inflation rates are lower, the exchange rate value appreciates, while higher inflation rate leads to currency depreciation. Secondly, interest rates affect exchange rates such that fluctuations in interest rates cause a corresponding fluaction in the currency exchange rates. This happens due to direct proportionality between interest rates and exchange rates. Moreover, exchange interest and inflation rates have a direct relationship implying that an increase in interest rates causes the currency value to appreciate since higher interest rates causes an increase in bank interest rates. Subsequently, more direct foreign investments are attracted which leads to an increase in exchange rates (Boglea & Iacob, 2011). Thirdly, the country’s balance of payments influences exchange rates. A deficit in the balance of payments caused by more imports causes currency depreciation. Likewise, changes in the balance of payments causes a corresponding change in the value of the domestic currency. Fourthly, exchange rates are affected by public debt, which is the value of government debt. When the national debt is low, the country can attract more foreign capital as opposed to when it is higher. Acquisition of foreign capital causes inflation. Foreign investors would usually liquidate their bonds on suspicion that the government debt is likely to increase. Subsequently, this causes a reduction in the exchange rates. Another factor that influences exchange rates is the terms of trade. It refers to the ratio of export prices to imports prices (Chan, Tse & Williams, 2011). Thus a country’s terms of trade are likely to increase subsequent to an increase in export prices as opposed to import prices. This causes an increase in GDP which in return causes an increase in the demand for the currency, and hence an increase in the value of the currency. Another factor the influences exchange rates is economic stability and performance. There is a direct relationship between political stability and exchange rates. A country with less political risk is more likely to attract more direct foreign investments as opposed to that with more political instability. A stable p...