1. Exchange rates
SSEIN1: The student will explain why individuals, businesses, and governments trade goods and services

2. Exchange rates Price of one nation’s currency in terms of another
Always changing
Determined by the DEMAND of each nation’s exports

3. Using Exchange rates
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
0.97
1.03
Euro
0.70
1.42
Japanese yen
113.94
0.008
Mexican peso
10.84
0.09
$1 U.S. is worth about _______ yen
1 yen is worth about ________ U.S. dollars

4. Appreciation
Increase in a currency’s value in relation to another currency
Becomes stronger

5. depreciation
Decrease in the value of a nation’s currency in relation to another currency
Currency becomes weaker

6. Change in exchange rate: u.s. and canada
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
From 1997 to 2007, has the U.S. dollar appreciated or depreciated in relation to the Canadian dollar?
From 1997 to 2007, has the Canadian dollar appreciated or depreciated in relation to the U.S. dollar?

7. When the U.S. Dollar appreciates (is strong)
Imports increase (foreign goods are cheaper for consumers to buy)
Travel abroad is cheaper for American tourists
US exports decline
US trade deficit increases

8. When the u.S. dollar depreciates (is weak)
U.S. exports increase and prices of exports go up
Travel abroad is more expensive for American tourists
Imports decline and the price of imports increases
Foreign investment in U.S. businesses improves