The Global Economy:
The World Monetary System

Grade Level

Introduction

This lesson focuses on foreign currency exchange in the global economy. While most people realize that foreign currency exchange rates affect the international traveler, few people understand the direct effects that these rates have on people who may never leave their communities. This lesson is designed to make students aware of international monetary transactions, and to show them how the jobs they hold and the purchases they make in their local community are affected by the foreign currency exchange market.

Teacher/Student
Objective

Gauging Student
Understanding

By directly engaging in supportive exercises, students will evidence reasoning and mathematic abilities related to aspects of the monetary system of the world. Both through teacher and peer evaluation of results they will receive immediate feedback as to the accuracy of their responses, and learn how to correct any misapprehensions.

Materials

• Copies of the Handout, Currency Exchange and Exercises B,C,D.
• Transparency of the Currency Chart.
• Ten or 15 travel sections from various newspapers (and/or travel brochures with prices).
• Access to Internet travel pricing sources.

Initial Data for
Consideration
and/or Process

• Exercise A demonstrates that each country has its own currency and monetary unit.
• Exercises B,C,D are directly related to specific aspects of currency exchange and the daily lives of people and businesses. In each case, there is an introductory paragraph and them some brief assignments for the students.

Exercise A Money Around the World

Organize the students into small groups. Have each group examine U.S. coins and currency and compare these to foreign coins and currency. A few examples of foreign paper currency can be obtained cheaply at a large bank (for example, a 500 sol bill from Peru will cost about $.25). Students may also be able to bring some examples of foreign currencies from home or from relatives who have lived or traveled abroad. How do the various currencies differ in size, color, markings, persons and things pictured, etc.? Students may be interested to learn that foreigners often find U.S. money difficult to comprehend, since there are no differences in the size or color of the bills and no numerical markings of value on any of the coins. It may also intrigue students that many foreign countries have their money printed in New York City, since the technology and equipment required to print money that cannot be easily counterfeited does not exist in many of the world's less-developed countries.

Reflect the transparency of the Currency Exchange Chart. This chart shows some of the world's major currencies. It also shows that the monetary units of different countries are not of equal value. Ask the class what problems might result from the fact that the world has over 150 currencies and that each of these has a different value. When would it be necessary to exchange a sum of money for its value in another country? (Foreign travel, foreign trade, international loans, foreign investment, transfers of profits and resources within international companies, and government expenditures overseas are some examples.) From this activity, students should understand that the monetary units of different countries have different values and that often it is necessary to exchange a sum of money in one currency for its value in another currency.

Other Possible
Activities

An exciting experience would be to ask various students to start out in a different country and plan a major trip to another country very distant from them. Have them estimate the cost of such a trip given the value of the currency on any one day. A collection of 'travel' sections from newspapers would help greatly to estimate costs of air travel and hotel accommodations, etc. This could also be accomplished using Internet travel access.

Notes

Currency controls: Most governments attempt to control, to some extent, the fluctuations of their currencies. This can be done indirectly by influencing supply and demand and/or by attempting to fix by decree, rather than through the foreign currency market, the exchange rate for the currency. When the government fixes exchange rates, there usually exists a "parallel market" or a "black market."

Currencies: The currencies of most Communist and formerly Communist countries, which are virtually worthless outside the country, are not traded on foreign currency markets. They can only be legally obtained at an official rate, fixed by decree, inside the country.