Unit 3 Lesson 1 Exchange Rates
Dec 22, 2015
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?
• A) Mexican consumers started buying more Levi’s.
• 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.
Year Pesos per Dollar
1 1,356
2 1,148
3 1,493
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
• equal one of these???
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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?
Which currency is
worth the most compared to
the U.S. dollar?
• A) Won
• B) Pound
• C) Shekel
• D) Ruble
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 = _______
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 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 B) $66.25
• C) $15.10 D) $150.95
1000 Great Britain Pounds (GBP) will buy how many Australian
Dollars?
• A) 43.21 B) 432.10
• C) 231.63 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
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.
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
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.
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?????????
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.
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
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?
• lose
• benefit
• benefit
• lose
• rise
• fall
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……………..
If the Japanese Yen rises against the Euro, Japanese producers
• A) sell more products
• B) sell fewer products
• C) are unaffected