Unit 3 Lesson 1
Exchange Rates
1) Grab your clicker.
2) Pick up a “Mall of the
World” menu…
…and pick out three things you
want to eat.
Which of the following best
explains why the Pesos per Dollar
changed from year 1 to year 2?
Year
1
2
3
• A) Mexican consumers
started buying more
Levi’s.
• B) More American
investors invested in
Mexican companies.
Pesos per Dollar
1,356
1,148
1,493
• C) Prices were rising
faster in Mexico than in
USA.
• D) Mexican drug wars
kept U.S. tourists from
going to Mexico.
How do American producers
like to be paid??
How do French producers like
to be paid??
Do foreign producers sell us
their stuff??
How do Americans get foreign
stuff?
Foreign Exchange
• Banks and other financial institutions
exchange currencies.
• When you buy a good from another
country, at some point your dollars are
changed into that country’s currency.
Exchange Rates
• Does one of these
QuickTime™ and a
decompressor
are needed to see this picture.
• equal one of these???
QuickTime™ and a
decompressor
are needed to see this picture.
Reading Exchange Rate
Tables
• How many Yen
equal 1 dollar?
• How many US
dollars does it
take to buy one
Mexican Peso?
• How many US
dollars does it
take to buy one
Ruble?
How much in
dollars does it
take to buy
one Shekel?
• A) $0.23
• B) $4.44
How many
British pounds
does it take to
buy a dollar?
• A) 1.58
• B) 0.63
Which
currency is
worth the most
compared to
the U.S.
dollar?
•
•
•
•
A) Won
B) Pound
C) Shekel
D) Ruble
Currency Converter
Ratios and Equations for
Foreign Exchange
•
•
•
•
•
•
•
•
If 1 peso = 3/4 dollar…
1 peso = 0.75 dollar
10 pesos = ______
100 pesos = ______
2 pesos = _______
3 pesos = _______
1 dollar = _______
2 dollars = _______
Clicker Quiz
Foreign Exchange Conversion
If 1.5 dollars buys 1 yen, then
• A) One dollar is more valuable than one
yen.
• B) One yen is more valuable than one
dollar.
• C) There is not enough information to
determine which one is more valuable.
If 1.5 dollars buys 1 yen, then
2 yen buys
•
•
•
•
A) 2 dollars
B) 2.5 dollars
C) 3 dollars
D) 3.5 dollars
If 1.5 dollars buys 1 yen, then
10 yen buys
•
•
•
•
A) 7.5 dollars
B) 15 dollars
C) 75 dollars
D) 150 dollars
If 1.5 dollars buys 1 yen, then
1 dollar buys
•
•
•
•
A) 0.67 yen
B) 0.75 yen
C) 6.67 yen
D) 7.5 yen
If 2.5 yen buy 1 dollar, then 10
dollars buys
•
•
•
•
A) 5 yen
B) 25 yen
C) 50 yen
D) 250 yen
If 2.5 yen buy 1 dollar, then 1
yen buys
•
•
•
•
A) 0.4 dollars
B) 0.5 dollars
C) 0.6 dollars
D) 2.5 dollars
10 British
pounds can be
exchanged for
how many
U.S. dollars?
•
•
•
•
A) $158.00
B) $15.80
C) $63.29
D) $632.90
Keisha traveled to the U.S. with 100 Canadian
dollars. How much did she receive when she
exchanged her money for U.S. dollars?
• A) $6.63
• C) $15.10
B) $66.25
D) $150.95
1000 Great Britain Pounds (GBP)
will buy how many Australian
Dollars?
• A) 43.21
• C) 231.63
B) 432.10
D) 2316.30
Jenna traveled to Canada with $1,000
(U.S.). About how much did she
receive in Canadian dollars?
•
•
•
•
A) 66 Canadian Dollars
B) 663 Canadian Dollars
C) 150 Canadian Dollars
D) 1,510 Canadian Dollars
Hamilton traveled to the USA with 10
Canadian Dollars. About how much
did he receive in U.S. Dollars?
• A) $15.10
• B) $150.95
• C) $66.25
• D) $6.63
How many Pounds (GBP’s) can I
get for 10 Swiss Francs?
•
•
•
•
A) 5.5
B) 55
C) 18
D) 181
Lunch time at the “Mall of the
World”
Your Annual Vacation To
France
Appreciation/Depreciation
• Exchange rates change.
• When 1 dollar buys more euros, the dollar
has appreciated.
• Appreciation of dollar / depreciation of euro:
• Year 1: $1 = 2 euros Year 2: $1 = 3 euros
• Year 1: 1 euro = $0.5 Year 2: 1 euro = $0.33
• $1 buys more euros.
• It takes more euros to buy a dollar.
QuickTime™ and a
decompressor
are needed to see this picture.
Between 1996 and 1998…
QuickTime™ and a
decompressor
are needed to see this picture.
• A) The yen appreciated, or rose against, the
dollar.
• B) The yen depreciated, or fell against, the
dollar.
Between 1998 and 2000…
QuickTime™ and a
decompressor
are needed to see this picture.
• A) The yen appreciated, or rose against, the
dollar.
• B) The yen depreciated, or fell against, the
dollar.
Between 1996 and 1998…
QuickTime™ and a
decompressor
are needed to see this picture.
• A) The Canadian dollar appreciated, or rose
against, the dollar.
• B) The Canadian dollar depreciated, or fell
against, the dollar.
Between 2000 and 2002…
QuickTime™ and a
decompressor
are needed to see this picture.
• A) The Canadian dollar appreciated, or rose
against, the dollar.
• B) The Canadian dollar depreciated, or fell
against, the dollar.
Between years one and two, the
peso _____ against the dollar.
• A) appreciated, rose, gained on
• B) depreciated, fell against
Exchange Rate Consultants
Make Believe World
QuickTime™ and a
decompressor
are needed to see this picture.
One bank, on an island in the middle of the
Atlantic Ocean, handles all currency
exchanges between the U.S. and Europe.
You Manage The Bank
• For as long as the bank has been open,
the exchange rate has been $1 : 1 euro.
• Americans have bought the same
amount of stuff from Europe as
Europeans have bought from America.
• So, you have never had to worry about
running out of either currency.
One day,
• you notice that many more ships from
America are sitting in the harbor,
• and very few European ships.
• At the end of the day, you have many
more dollars in the vault than euros.
• The rest of the week goes the same
way.
Time For A Decision
• The rest of the week goes the same
way.
• You are running very low on euros.
• What do you do?????????
Floating Exchange Rates
When Supply and Demand
Determine the Value of Currency
Why Exchange Rates Change
• If U.S. goods or investments become
more popular, demand for dollars
_______.
• This makes the dollar __preciate.
• Higher inflation in U.S. would make
dollar __preciate.
2 Countries: Mac-land and
Bean-ico
Macks and Beaners
The Exchange Rate Over Time
• This chart shows the number of Yen it took to buy 1
Euro each year.
• When the number gets bigger, the yen has lost value,
& vice versa.
Between years one and two, the
dollar _____ against the peso.
• A) appreciated, rose, gained on
• B) depreciated, fell against
Between years 1 and 2, the
demand for dollars could
have…
• A) increased.
• B) decreased.
Between years one and two, the
supply of dollars could have…
• A) increased.
• B) decreased.
Which of the following best explains
why the Pesos per Dollar changed
from year 1 to year 2?
• A) Inflation was higher in the U.S. than in Mexico.
• B) Mexican drug wars caused a decrease in U.S.
tourists going to Mexico.
Which of the following BEST
explains why the Yen per Euro
changed from year 1 to year 2?
• A) Japanese consumers demand more
European goods & services.
• B) Japanese business firms increased their
exports to Europe.
Which of the following BEST
explains why the Yen per Euro
changed from year 1 to year 2?
• A) Japanese investment in European
companies increased.
• B) The inflation rate in Europe increased at a
faster rate than it did in Japan.
4 Groups
U.S. Producers
U.S. Consumers
European Consumers
European Producers
Within your group, decide whether
you benefit or lose from the
change in the exchange rate.
Who loses and who benefits?
If the dollar rises against the euro
1. U.S. producers………….•
2. U.S. consumers………..•
3. European producers….•
4. European consumers..•
5. U.S. exports………………•
6. U.S. imports……………..•
lose
benefit
benefit
lose
rise
fall
If the Japanese Yen rises against
the Euro, Japanese producers
• A) sell more products
• B) sell fewer products
• C) are unaffected
If the U.S. Dollar falls against the
South Korean Won, South Korean
consumers
• A) buy more U.S. goods
• B) buy fewer U.S. goods
• C) are unaffected