There are many factors that contribute to a nation’s fiscal health. One important factor is the strength of its currency. In this project students will learn what is meant by the value of a currency, use the Internet to find currency exchange rates, and relate the stability of a country’s currency with other factors such as standard of living, general productivity or political climate.

This project is designed for a high school economics class, but could easily be adapted for geography, history, business, or mathematics. The lesson pushes the higher end of Bloom’s taxonomy.

Students should be able to search the Internet for particular information.

Internet access.

Define what is meant by the "value of a currency".

Determine factors that make a currency "stable", "strong" or "weak".

Use the Internet to find currency exchange rates for countries throughout the world.

Search the Internet for information about why currency rates fluctuate.

Find financial ratings of various countries throughout the world.

Find a relationship between the stability of a country’s currency and other factors such as the country’s standard of living, general productivity, political stability, etc.

Compare information given by different Internet sites about a particular country.

Students will first use the Internet to determine what is meant by the "value of a currency" and what makes a "strong", "weak" and "stable" currency. They will then obtain data on exchange rates of various countries relative to the U.S. dollar. Next they will choose two countries, one of which has had a stable currency over the past five years and the other a fluctuating currency. They will then use the Internet to find other information about these two countries, such as standard of living, political stability, general economic conditions, natural resources, etc. Finally they will compare the general well-being of the two countries they studied with the stability of the country’s currency.

The instructor may either assign the "Currency Worksheet" or require students to write a two-to-three page research paper. If a paper is required, distribute the "Guidelines for Currency Study" to the students.

After all students have completed their study, the class can share the information they found and try to make general statements about characteristics of countries with stable currencies as compared to those countries with fluctuating currencies. 

Use points on the Currency Worksheet or the scoring rubric for research papers. After worksheets or papers are completed, the class should compile their findings to try to determine which economic, political and social factors are truly related to the stability of a nation’s currency.

Students may find instances when currency has been "devalued" in a country and research reasons for and consequences of devaluation. Or students may find information about how the value of the dollar has changed ver the past 100 years.

!!!! Warning !!!! The Web sites given in this lesson may have changed! Before using this lesson with your students, be sure to check if the sites are still working or if you must find another site. Sometimes the sites still have the relevant data but you may need to change the directions to access the data.

Instructors of business and mathematics classes may omit the detailed study of the economic, social and political conditions in the two chosen countries.

For a list of currency names and standard codes see http://www.jhall.demon.co.uk/currency/by_country.html

In order to print out just a copy of the student worksheet, highlight this section, then copy and paste it into your word processor. You may then revise the worksheet if you wish.

You will search the Internet for information about currency and economic conditions in various countries. Good starting points for the information you will need are the CIA World Facts site http://www.odci.gov/cia/publications/factbook/index.html the Federal Reserve of Chicago Bank site http://woodrow.mpls.frb.fed.us/sylloge/strong$.html the Currency Exchange http://www.quoteline.com and the International Financial Rating site http://www.fitchibca.com/sovereigns/sovereign_ratings The New York Times and the Wall Street Journal both offer on-line articles on these topics.

First find information on the meaning of the "value of a currency" and currency exchange rates over the past five years. Find countries whose currency has been stable relative to the United States dollar for this time period and countries whose currency has fluctuated. What does the stability of a currency have to do with a country’s economy?

Now choose two countries, one having a stable currency and one having a non-stable currency. Find out other information about these countries. For example, how would you describe this country’s standard of living. What is the quality of life for citizens of this country? How would you describe the productivity of this country’s economy? Is the country politically stable? What kind of government does it have? What is its inflation rate or unemployment rate? What is its fiscal rating? What is its justice system? What is its financial rating?

Do you see any relationships between the stability of a country’s currency and the general economic and political conditions of the country? Include evidence and show support for your claims as provided by objective sources.

Your paper will be evaluated according to the following criteria.

1. (10 points) Define what is meant by the "value of a currency".

2. (10 points) Describe factors that make a currency "stable", "strong" or "weak".

3. (10 points) Summary (table or graph) of currency exchange rates relative to the U.S. dollar over the past five years for various countries.

4. (60 points) Comparison of two countries, one having a stable currency and another having a non-stable currency with respect to the U.S. dollar, with regard to the following areas:

a. Quality of life;

b. Productivity of the economy;

c. Political conditions;

e. At least three other factors.

5. (20 points) Discussion and conclusions about how the stability of a country’s currency is related to the country’s general economic, social, and political condition of the country.

6. (10 points) Variety of relevant Internet sources and discussion of the reliability of their information.

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You will search the Internet for information about currency, exchange rates, and economic conditions in various countries.

1. (5 points each) Access the site

http://www.frbchi.org/pubs-speech/publications/BOOKLETS/strong_dollar/strong_dollar.html

and answer the following questions.

a. What is meant by the value of a currency from a domestic perspective?

b. What is meant by the value of a currency relative to an international perspective?

c. What do we mean by a strong dollar?

d. What do we mean by a weak dollar?

e. What do we mean by a stable dollar?

f. Is it better to have a strong or a weak dollar? Explain why.

2. (5 points) Access the site http://www.quoteline.com and obtain information about currency exchange rates of various countries relative to the U.S. dollar. (Click on "Charts" and then on the second :Show Charts and Graphs" button.) Name three countries whose currencies have been relatively stable as compared to the United States during the past five years. (That is, their exchange rates have not changed much.)

3. (10 points) Make a table or graph showing the exchange rate of the currency during the past five years for one of the countries you named in #2.

Country ______________________

4. (5 points) Name three countries whose exchange rates relative to the U. S. dollar have changed quite a bit during the past five years.

5. (10 points) Make a table or graph showing the exchange rates during the past five years for one of the countries you named in #4.

Country ______________________

Use at least three different Internet sites to find the following information. A good starting point for the information you will need is http://www.odci.gov/cia/publications/factbook/index.html (Click on "Country Listing". Think about any discrepancies among the sites you use or whether one site emphasizes some type of information more than another site or omits some types of information. Ask yourself, for example, does the CIA data match the information provided by a site from that country or from other countries?

For each of the two countries you chose in #3 and #5, answer the following questions.

6. (2 points) What is the rate of inflation for this country?

Stable currency country: __________________________

Non-stable currency country: ________________________

7. (10 points) Describe the quality of life for the citizens of this country.

Stable currency country:

Non-stable currency country:

8. (10 points) How would you describe the productivity of your country’s economy?

Stable currency country:

Non-stable currency country:

9. (10 points) Describe this country’s political system and stability during the last ten years.

Stable currency country:

Non-stable currency country:

10. (2 points) What is the international financial rating of this country?

Use http://www.fitchibca.com/sovereigns/sovereign_ratings

Stable currency country: ______________________________

Non-stable currency country: ________________________________

11. (10 points) What conclusions can you make regarding the stability of a country’s currency and the factors you studied in Questions #6 through #10?

12. (5 points) List the Internet sources you used. Would you describe your Internet sources as reliable? Why or why not?

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You will search the Internet for information about currency, exchange rates, and economic conditions in various countries.

1. (5 points each) Access the site

http://www.frbchi.org/pubs-speech/publications/BOOKLETS/strong_dollar/strong_dollar.html

and answer the following questions.

a. What is meant by the value of a currency from a domestic perspective?

The purchasing power or the amount of goods and services the currency can buy. In inflationary times, the value of the currency goes down.

b. What is meant by the value of a currency from an international perspective?

How much it costs to buy or sell the currency of one country with the currency of another country. For example, it might cost one U.S. Dollar to buy two Brazilian Real.

c. What do we mean by a strong dollar?

The dollar can buy more "money" of other countries. If the dollar is strong, the prices of foreign goods drop for U.S. customers. For example, if the dollar becomes stronger, then, instead of getting, say, two Brazilian Reals for one dollar, you might be able to get three Brazilian Reals for one dollar. Hence you can buy more Brazilian goods with one U.S. dollar than before.

d. What do we mean by a weak dollar?

The dollar can buy less "money" of other countries. Prices of foreign goods rise for U.S. customers.

e. What do we mean by a stable dollar?

The purchasing power of the dollar remains about the same both domestically and internationally.

f. Is it better to have a strong or a weak dollar? Explain why.

Neither. It is best to have a stable dollar to sustain long-term economic growth both at home and abroad so that people in all nations would have the benefits of better quality, lower prices and a broader selection of products.

2. (5 points) Access the site http://www.quoteline.com and obtain information about currency exchange rates of various countries relative to the U.S. dollar. (Click on "Charts" and then on the second "Show Charts and Graphs" button.) Name three countries whose currencies have been relatively stable as compared to the United States during the past five years. (That is, their exchange rates have not changed much.)

Switzerland, France, Norway

3. (10 points) Make a table or graph showing the exchange rate of the currency during the past five years for one of the countries you named in #2.

Country ____ Switzerland ____

US $1 could buy between 1.13 Swiss francs and 1.55 Swiss francs

4. (5 points) Name three countries whose exchange rates relative to the U. S. dollar have changed quite a bit during the past five years.

Bulgaria, Indonesia, Turkey

5. (10 points) Make a table or graph showing the exchange rates during the past five years for one of the countries you named in #4.

Country _____ Turkey____

US $1 could buy between 31,237 Turkish Lira and 405,879 Turkish Lira

Use at least three different Internet sites to find the following information. A good starting point for the information you will need is http://www.odci.gov/cia/publications/factbook/index.html Think about any discrepancies among the sites you use or whether one site emphasizes some type of information more than another site or omits some types of information. Ask yourself, for example, does the CIA data match the information provided by a site from that country or from other countries?

For each of the two countries you chose in #3 and #5, answer the following questions.

6. (2 points) What is the rate of inflation for this country?

Stable currency country: -0.1%

Non-stable currency country: 99%

7. (10 points) Describe the quality of life for the citizens of this country.

Stable currency country:

Population growth is 0.22%

Infant mortality is 4.92 deaths per 1000 births

Life expectancy is 78.9 years

Literacy rate is 99%

Telephone, radio, TV, railroads, highways, airports, recreational facilities excellent

Current environmental issues: air pollution, acid rain, water pollution, loss of biodiversity

Non-stable currency country:

Population growth is 1.6%

Infant mortality is 38.27 deaths per 1000 births

Life expectancy is 72.8 years

Literacy rate is 92% male, 72% female

Telephone, radio, TV, railroads, highways, airports, recreational facilities fair

Current environmental issues: air pollution, water pollution, deforestation

8. (10 points) How would you describe the productivity of your country’s economy?

Stable currency country:

GDP real growth rate 0.4%

Per capita purchasing power is $23,800

Unemployment rate is 5%

Electric consumption per capita is 6850 kWh

Exports 99.2 billion; imports 86.6 billion

Non-stable currency country:

GDP real growth rate 7.2%

Per capita purchasing power $6,100

Unemployment rate 11%

Electric consumption per capita 1636 kWh

Exports 26 billion; imports 46.7 billion

9. (10 points) Describe this country’s political system and stability during the last ten years.

Stable currency country:

Elected officials, democratic

No international disputes

Non-stable currency country:

Similar to European political and legal systems

International disputes: with Greece, air and territorial; with Syria and Iraq, water rights

10. (2 points) Use http://www.fitchibca.com/sovereigns/sovereign_ratings to find the international financial rating of this country.

Stable currency country: AAA (excellent)

Non-stable currency country: B+ (poor to fair)

11. (10 points) What conclusions can you make regarding the stability of a country’s currency and the factors you studied in Questions #6 through #10?

A currency is more stable if there is low inflation, stable population, low debt, high per capita purchasing power, good education, stable government and no international disputes.

12. (5 points) List the Internet sources you used. Would you describe your Internet sources as reliable? Why or why not?

For Switzerland, http://geneva.ch by the Swiss Department of Economy, Labor and Foreign Affairs

http://www.span.ch by a Swiss Internet service

http://swissinfo.org a Swiss newspaper site

For Turkey, http://list2000.com.tr a tourist/business site located in Istanbul

http://I-cias.com the Encyclopedia of the Orient

http://garantibank.com.tr a private bank site in Turkey

http://www.turkishdailynews.com a Turkish newpaper

These sites gave more information about business opportunities, recreational facilities, and news important to the country. They seemed to be reliable but tended to emphasize good opportunities rather that discuss problems. The newspapers, however, had articles that discussed current problems.