Understanding money and exchange rates

Introduction

We hear a lot today about the economy—whether domestic, international, or global. An economy is a system of interaction or exchange, and currency is an essential part of it. How much do you know about the concept of currency and how currency works? For example, can you define "currency"? [List students’ definitions on the board.] The word can refer to the following two concepts:

• First, currency refers to a standard of value—an abstract measure that we use to compare the value of goods, services, and obligations. For example, a culture could use a cow or an ounce of gold as a standard of value. An object could be said to be worth three cows or two ounces of gold.
• Second, currency refers to a medium of exchange. Anything that is widely established as a means of payment. There are different ways to set the standard of value and the medium of exchange in a society. One very common way is by fiat, which is an edict or agreement issued by a court.

• Another way is to issue scrip or "temporary money." Scrip is issued for short-term, immediate use. [Read the definition of "scrip" in the Columbia Encyclopedia. Ask for examples.]

Every culture values currency differently. [Go to bing.com and conduct a visual search for "Currency from Around the World."]

Every culture has its own understanding of value, and that understanding is reflected in the currency it uses for transactions between people. [Hold up a paper bill of your country’s currency.] The paper that it is printed on is not worth very much. So what gives paper currency its value? Can the value of currency change? In this activity we are going to try to answer these and other questions. You will research the concept and the history of currency, examine currencies from several countries, and compare their current exchange rates.