(See download link, above, for handouts, visuals, and teacher guide.) As they experience the need to exchange currencies to purchase foreign goods, they learn about the difference between the domestic and international values of a currency and how factors of supply and demand work to set international exchange rates. This activity provides an opportunity for students to participate in a simulated foreign exchange market. Most countries create their own currency for use as money.People consume goods and services, not money money is useful primarily because it can be used to buy goods and services.Money is anything widely accepted as final payment for goods and services.Standard 11: Money – Money makes it easier to trade, borrow, save, invest, and compare the value of goods and services. Foreign exchange markets allocate international currencies. Like other prices, exchange rates are determined by the forces of supply and demand. An exchange rate is the price of one nation’s currency in terms of another nation’s currency.This interaction determines market prices and thereby allocates scarce goods and services. Standard 7: Markets – Markets exist when buyers and sellers interact. Just as in any market many factors can influence either the supply of, or the demand for, a given currency and this will affect the international exchange rate of the currency. The actual price (or international value) of currencies is set through the interaction of supply and demand in these international currency markets. International monetary markets serve as the mechanism to set the relative values of currencies. Given the number of countries, currencies, and trading relationships in the world, this is a complicated process.

Even when they don’t need the actual currency, they must establish a relative value between currencies. Importers often must obtain the currency of the exporter’s country to purchase the goods to be imported. Many international exchanges of goods and services are facilitated by the exchange of the currencies of the trading countries.

Virtual Lesson Instructions & Slides Overview Download Foreign Currency Activity: Teacher Guide, Handouts, Visuals (.doc file)

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