 On your warm up sheet of paper, why is money important to trade? ◦ It make trading easier (compared to bartering system) ◦ It helps people make exchanges ◦ It has an established value that they can store and use later ◦ It can be used to measure value and relative prices

Students experience how international trade works by exchanging U.S. dollars for foreign currencies to make purchases.

 Students will be able to… ◦ Identify foreign currencies and give examples ◦ Learn about the power of the U.S. dollar. ◦ Explain why they must exchange currency in order to trade with other countries. ◦ Explain the role of money in global trade ◦ Conduct transactions using foreign currency

 Do all countries use the same money? ◦ Some European countries do, Belgium, Germany, Greece, Spain, France, Estonia, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland, Cyprus, Malta, Slovenia, and Slovakia are the 17 members of the EU that use the Euro.

 Which currency do you think is the most widely traded currency in the world? ◦ The stability of the US dollar has made it the most widely traded currency in the world. Dollars are invested in many capital markets. Dollars are used as a reserve currency for many governments’ central banks. Dollars are a transaction currency in many international commodity markets. The second most traded currency in the world is the Euro, primarily because so many countries use the Euro.

 What types of currencies do people use in the US and other countries?

CountryCurrencyOrigin of Name IndiaRupeeFrom the root meaning “Silver” RussiaRubleMeans “to cut” ChinaRMB or YuanMeans “the People’s Currency PeruSolMeans “the sun” BrazilRealMeans “the Southern Cross GermanyEuroCurrency now common among European Union Members GhanaCediMeans “Cowrie”, which is a type of shell that was used as currency in parts of Africa JapanYenMeans “round” and originated when Japanese money changed from being square to round EnglandPoundA pound of silver IsraelShekelMeans “weight”

 Do different currencies have the same value?  What do you need to know about a country’s money before you make plans to travel to a country for a vacation or to study abroad? ◦ The value of foreign currency will need to be compared to the US dollar, because it will determine how far their money will go in another country.

CurrencyUS DollarJapanese Yen Brazilian Real Euro Exchange Rate These exchange rates are approximate and are not necessarily representative of the current exchange rate. We will use the rates for our next activity. An exchange rate tells the value of one country’s currency in terms of another. Exchange rates vary considerably between countries and change often, knowing the current exchange rate is important. If the dollar is “weak” compared to a foreign currency, will items purchased in that country be more or less expensive then those bought at home?

 They will be more expensive because it takes more dollars to buy that country’s currency.  They are converters online to help us out.  Approximate rates of exchange of the US dollar against various world currencies is reported every week in the Wall Street Journal.

 ail/2012/07/daily-chart-17 ail/2012/07/daily-chart-17  Does anything surprise you?  Do you see any trends?  Could you afford a Big Mac in other countries?  Where is the cheapest Big Mac?  Where is the most expensive Big Mac?  What factors could contribute to the differences in prices?

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 Currency Exchange Game ◦ You will “travel” to foreign countries where you will exchange US dollars to see how many goods and services you can purchases using foreign currencies. ◦ Turn to the Currency Exchange Game page in your student workbook. ◦ You have $200 to spend during a one day trip to each of the following countries: Mexico, England, China, and Japan. ◦ You must convert your US dollar to the currency of the country you are visiting. ◦ In each country you must buy as many items as you deem appropriate given the amount of foreign currency received. ◦ In addition, you need to choose between a hotel and hostel for your nights lodging. If you have any money left over, you should convert it back into dollars before leaving the country, completing the information at the bottom of each page. ◦ You will be given 15 minutes to complete this

 Where did the dollar buy the most? The least?  People and businesses involved in international trade (importing and exporting) have to do the same thing that you did in your “travels.” That is, they must change their dollars into the currency of the trading country.

 In international Towne each country will use one of four regional currencies. Citizens are paid in the currency of the country where they work. You must visit the international bank in Singapore to exchange your currency for that of the other three regions. Or for a fee you can exchange your currency in one of the four regional currency exchange countries. Deciding where to exchange currency is an example where you need to understand the Time Value Money as well as opportunity costs.  International Towne countries must also exchange currencies when trading with other countries.