Using NewsHour Extra Feature Stories

Overview: NewsHour Extra features stories can help students identify and interpret key issues in current events. This activity anticipates one class period, but the follow-up essay might be assigned as homework, or in another period.

Warm Up: Use initiating questions to introduce the topic and find out how much your students know.

Main Activity: Have students read NewsHour Extra's feature story and answer the questions on the reading comprehension handout.

Discussion: Use discussion questions to encourage students to think about how the issues outlined in the story affect their lives and express and debate different opinions.

Follow-up: Students can write an 500-word editorial on the topic expressing their views and send it to NewsHour Extra [extra@newshour.org] for possible publication.

Evaluation: Students are graded on their answers to reading comprehension questions and/or their editorial.

Story: U.S. Dollar Hurting Tourists and Global Businesses, 12/6/04
http://www.pbs.org/newshour/extra/features/july-dec04/dollar_12-06.html

Initiating Questions:

1. Do people in other countries buy things with U.S. dollar bills?

2. What other kinds of currency are there?

3. How much money would you get in London if you exchanged $1?

4. Why is the currency exchange rate for different countries important to people and businesses?

Reading Comprehension Questions: (click here for printout)

1. What is happening to the U.S. dollar?

This scenario and many like it are playing out in shops and restaurants across Europe as the value of the U.S. dollar drops to historic lows against the European euro, the British pound and the Japanese yen. Travelers who once paid 82 cents for each euro must now pay $1.34.

"If you take your dollar to a bank and ask for say euro or yen, you get less than you would have otherwise," said Kenneth Rogoff, a professor of economics at Harvard University. "It also means that if somebody from Paris or Berlin comes to New York, they think everything is pleasantly cheap. But if one of us goes over there, it suddenly looks really expensive."

2. What is causing the dollar's decline?

According to analysts, the decline in the U.S. dollar is due to two deficits -- one between the amount of goods Americans buy from other countries and the amount other countries buy from us, and one between how much money the government collects in taxes and how much it spends on roads, military, social programs and other expenses.

3. What is the federal budget deficit?

Currently, the federal deficit, the amount the government borrows to cover its spending, is $413 billion. This means the federal government is $413 billion in debt.

4. How does the federal budget deficit affect the value of the dollar?

The U.S. finances its debt by selling bonds, and because mostly foreign countries buy those bonds, much of the money is borrowed from countries like China and Japan.

As the deficit continues to grow and the United States falls further into debt, these countries have begun to worry that when the time comes, the United States might not be able to pay the returns on its investment. Because of this, several countries have begun to place less value in the dollar.

"[T]he United States has been borrowing and borrowing and borrowing," Rogoff, said. "[T]he United States is allowed to put the rope around its neck several times, but it's coming to an end. And that's why the dollar is starting to go down, because everybody is sort of seeing it coming to an end."

5. What is the affect of trade on the dollar?

According to Irwin Stelzer, director of economic policy studies at the Hudson Institute in Washington, D.C., American trade policy is another reason for the decline in the dollar's value.

"It's happening primarily because we are buying more stuff from the rest of the world than the rest of the world is buying from us. As long as that goes on, we're shipping over to other countries pictures of American presidents on little bits of paper and they're sending us automobiles and T-shirts."

"At some point, they don't want any more of our pictures of American presidents," Stelzer said.

6. What happens to imports and exports as the dollar weakens?

A declining dollar spells trouble for countries that export goods to the United States. Those countries, like Mexico and Honduras, who once got top dollar for their goods, now are being paid in U.S. dollars that aren't worth as much.

On the other hand, according to Stelzer, American goods seem cheap to other countries, which could increase demand and help U.S. manufacturers.

At home, the impact of a weak dollar overseas could mean an increase in prices at the store since products from countries like China now cost more to bring in.

Discussion Activity (more research might be needed):

1. Research the factors that contribute to the federal budget deficit. What sorts of things does the government spend money on? What might be some good effects of a large federal deficit?

2. Using Web sites like hotels.com and yahoo.com or travelocity.com, estimate the cost of a week-long trip to London or Berlin (include airfare, hotel and $200 spending money). Now estimate the cost of a comparable vacation to Mexico or another country outside of Europe, China or Japan. How much would both trips cost in U.S. dollars? In order to calculate the amount of spending money you'd have, use an online currency exchange calculator to figure out what you'd end up with in both countries if you converted $200. Which trip is more affordable?

Write a 300-500 word essay on any of these topics providing clear examples. Send your completed editorial to NewsHour Extra [extra@newshour.org]. Exceptional essays might be published on our Web site.