Lesson Plan

• Describe what a trade‑weighted exchange rate (TWI) is and why it is preferred to bilateral rates.
• Explain the components of the TWI formula and how trade shares are calculated.
• Calculate a TWI using given export data and nominal exchange rates.
• Analyse how changes in the TWI affect a country’s export competitiveness and policy decisions.
• Identify common errors when constructing a TWI.

• Projector or interactive whiteboard
• Printed worksheet with data tables and calculation steps
• Calculator or spreadsheet software (e.g., Excel)
• Handout of the TWI formula and key definitions
• Sample trade data for the UK and partner countries
• Graph paper or digital tool for sketching a bar chart (optional)

Begin with a quick poll: “If the pound fell against most of our trading partners, what would happen to UK exports?” Connect this to prior learning on nominal and real exchange rates. State that today’s success criteria are to define a trade‑weighted exchange rate, work through its formula, and interpret its impact on competitiveness.

1. Do‑now (5’) – Students answer the poll question on sticky notes and share ideas.
2. Mini‑lecture (10’) – Review nominal vs real rates, introduce the TWI concept and formula.
3. Guided practice (15’) – Walk through the UK example, calculate trade shares and the index together on the board.
4. Pair activity (15’) – Students use the worksheet data to compute a TWI for a different country, checking calculations with calculators/Excel.
5. Class discussion (10’) – Groups present results, discuss what a higher or lower index indicates for trade balance and policy.
6. Formative check (5’) – Exit ticket: write one implication of a falling TWI.

Summarise that the TWI aggregates bilateral rates using trade weights, giving a clearer picture of currency competitiveness. For the exit ticket, students note one policy implication of a change in the index. Assign homework to locate recent TWI data for a chosen country and write a brief commentary on its recent trend.