Exchange rates — Economics, 11–13 years
How the value of one country’s money is compared with another country’s money. Economics, 11–13 years.
Changing money into money
An exchange rate tells you how much of one currency is needed to get another. For example, if €1 buys $1.10, one euro has that value in US dollars at that moment. The rate can move, so the same euros may buy more or fewer dollars on another day.
Why do rates matter?
Countries use different currencies, but people and businesses still buy across borders. A rate lets a traveller compare prices and lets an importer calculate a cost. When a currency becomes stronger, foreign goods may cost less in it; when it weakens, imports may cost more. The same change affects different people differently.
A holiday budget
You have €200 for a trip. The exchange office offers $1.10 for each euro. Multiply 200 by 1.10: you receive $220 before any fee. If the rate is later $1.05 per euro, multiply 200 by 1.05: you receive $210. A change of €0.05 per euro changes the result by $10.
The bigger number is not always better
It is easy to compare 1.10 and 1.05 and say the first rate is always better. But you must check which currency is being offered and whether the fee is included. A rate of $1.10 per euro is not the same statement as €1.10 per dollar, so the direction of the comparison matters.
Travel and online shopping
Exchange rates appear when your family travels, sends money abroad or buys something from another country. A website may show a low foreign price, but the final cost also depends on the current rate, delivery and fees. Checking the total in your own currency prevents a misleading comparison.
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