Unit 3 Lesson 1

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Unit 3 Lesson 1

• Exchange Rates

2
Grab your clicker.2) Pick up a Mall of the
World menu

• and pick out three things you want to eat.

3
Which of the following best explains why the
Pesos per Dollar changed from year 1 to year 2?
Year Pesos per Dollar
1 1,356
2 1,148
3 1,493

• A) Mexican consumers started buying more Levis.
• B) More American investors invested in Mexican
  companies.

• C) Prices were rising faster in Mexico than in
  USA.
• D) Mexican drug wars kept U.S. tourists from
  going to Mexico.

4
How do American producers like to be paid??
5
How do French producers like to be paid??
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Do foreign producers sell us their stuff??
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How do Americans get foreign stuff?
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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
  countrys currency.

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Exchange Rates

• Does one of these
• equal one of these???

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Reading Exchange Rate Tables
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• 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?

12
How much in dollars does it take to buy one
Shekel?

• A) 0.23
• B) 4.44

13
How many British pounds does it take to buy a
dollar?

• A) 1.58
• B) 0.63

14
Which currency is worth the most compared to the
U.S. dollar?

• A) Won
• B) Pound
• C) Shekel
• D) Ruble

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Currency Converter
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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 _______

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Clicker Quiz

• Foreign Exchange Conversion

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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.

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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

20
If 1.5 dollars buys 1 yen, then 10 yen buys

• A) 7.5 dollars
• B) 15 dollars
• C) 75 dollars
• D) 150 dollars

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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

22
If 2.5 yen buy 1 dollar, then 10 dollars buys

• A) 5 yen
• B) 25 yen
• C) 50 yen
• D) 250 yen

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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

24
10 British pounds can be exchanged for how many
U.S. dollars?

• A) 158.00
• B) 15.80
• C) 63.29
• D) 632.90

25
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 B) 66.25
• C) 15.10 D) 150.95

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1000 Great Britain Pounds (GBP) will buy how many
Australian Dollars?

• A) 43.21 B) 432.10
• C) 231.63 D) 2316.30

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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

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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

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How many Pounds (GBPs) can I get for 10 Swiss
Francs?

• A) 5.5
• B) 55
• C) 18
• D) 181

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Lunch time at the Mall of the World
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Your Annual Vacation To France
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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.

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Between 1996 and 1998

• A) The yen appreciated, or rose against, the
  dollar.
• B) The yen depreciated, or fell against, the
  dollar.

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Between 1998 and 2000

• A) The yen appreciated, or rose against, the
  dollar.
• B) The yen depreciated, or fell against, the
  dollar.

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Between 1996 and 1998

• A) The Canadian dollar appreciated, or rose
  against, the dollar.
• B) The Canadian dollar depreciated, or fell
  against, the dollar.

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Between 2000 and 2002

• A) The Canadian dollar appreciated, or rose
  against, the dollar.
• B) The Canadian dollar depreciated, or fell
  against, the dollar.

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Between years one and two, the peso _____ against
the dollar.

• A) appreciated, rose, gained on
• B) depreciated, fell against

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Exchange Rate Consultants
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Make Believe World

• One bank, on an island in the middle of the
  Atlantic Ocean, handles all currency exchanges
  between the U.S. and Europe.

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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.

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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.

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Time For A Decision

• The rest of the week goes the same way.
• You are running very low on euros.
• What do you do?????????

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Floating Exchange Rates

• When Supply and Demand Determine the Value of
  Currency

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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.

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2 Countries Mac-land and Bean-ico

• Macks and Beaners

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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.

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Between years one and two, the dollar _____
against the peso.

• A) appreciated, rose, gained on
• B) depreciated, fell against

49
Between years 1 and 2, the demand for dollars
could have

• A) increased.
• B) decreased.

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Between years one and two, the supply of dollars
could have

• A) increased.
• B) decreased.

51
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.

52
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.

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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.

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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.

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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

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If the Japanese Yen rises against the Euro,
Japanese producers

• A) sell more products
• B) sell fewer products
• C) are unaffected

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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