1. If you could go anywhere…
Pick three countries from around the world on separate continents that you would like to visit

2. Exchange Rates
When international trade occurs, one nation exchanges money, or currency, in return for goods from another nation. Every nation is normally ultimately paid in its own currency. When an American company imports Japanese computers, it must pay them in Japanese yen. When the Japanese import American beef, they pay in dollars.

3. Exchange Rates, Cont.
The relative values of different currencies are expressed as an exchange rate, the price of one nation’s currency in terms of another nation’s currency.
The exchange rates for the U.S. dollar and the Japanese yen tell you how many yen the Japanese must exchange for one dollar or what percentage of a dollar Americans must pay for one yen.
Exchange rates are always changing.
The exchange rate between two currencies depends on how much demand there is for each country’s exports at any given time. When there is more demand for a nation’s products, people need more of that nation’s currency to buy the products.

4. Table 1: Exchange Rates for the American Dollar
Value of $1 U.S
(in foreign currency)
Value of foreign currency
(in U.S. dollars)
Canadian dollar
1.33
.75
Euro
.93
1.07
Japanese yen
122.97
0.0081
Mexican peso
16.79
0.060

5. Examples
You can see that in 2015, $1 was worth about yen, while 1 yen was worth about of $1, or less than a penny.
So if the price of an imported Japanese computer is $1000, the American company must exchange $1000 for about 122,970 yen to pay for it. (IMPORTING)
$1 U.S. dollar = yen
$1000 U.S. = X 1000 = 122,970 yen
If American beef costs 250 yen per pound, then the Japanese importer must exchange 250 yen for about $2 to pay for each pound of beef. (EXPORTING)
1 yen = .008 U.S. dollars
250 yen = $.008 X 250 = $2

6. Appreciation and Depreciation
Value of $1 U.S. in Canadian dollars
Value of $1 CAN in U.S. dollars
1997
1.39
0.73
2007
0.97
1.03
2012
1.003
.997
2015
1.33
.75

7. Explanation
You can see that in 1997 it cost $1.39 to buy $1.00 U.S. The American dollar was strong, or worth more than the Canadian dollar. When Americans traveled to Canada, they could exchange each of their American dollars for $1.39 in Canadian money.
Therefore, they could buy more Canadian goods, while Canadians traveling to the U.S. received less than one American dollar for each Canadian dollar they exchanged, so they could not afford to buy as many American goods.
By 2007, however, the situation had changed. The American dollar had lost value, or depreciated, in relationship to the Canadian dollar, while the Canadian dollar had gained value or appreciated. Now that the American dollar was weaker, Canadian shoppers and importers could afford fewer Canadian goods.
However, American exporters benefited from the weak dollar. Because American goods were now cheaper, Canadians would buy more of them.

8. Effects of Currency Appreciation
When the dollar is strong, or appreciates
Imports increase and are cheaper for consumers to buy
Travel abroad is cheaper for American tourists
U.S. exports decline – more expensive for other countries to buy our products
The U.S. trade deficit increases – We export less

9. Currency Depreciation
When the dollar is weak, or depreciates
U.S. exports increase and the prices of exports go up – cheaper for other countries to buy our stuff
Travel abroad is more expensive for American tourists
U.S. imports decline and the price of imports increases – foreign items are more expensive from other countries
The U.S. trade balance improves – exports increase – cheaper for other countries to buy our products
Foreign investment in U.S. business increases