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LESSON
PLAN: THE FALL OF THE DOLLAR By
Lara Maupin, a former social studies teacher and student government adviser at
Thomas Jefferson High School for Science and Technology in Alexandria, Virginia Subjects:
government/civics, macroeconomics, current events Estimated
Time: One to two class periods Lesson
Objectives: - Students
will understand the basic workings of the international market for foreign exchange,
especially how exchange rates are determined, how the value of a nation's currency
is connected to its international trade, and how governmental policies can impact
the market.
- Students
will identify the positive and negative consequences of a fall in the value of
the dollar.
Correlation
to National Standards Overview:
In
this lesson, your students will examine the fall of the dollar in order to better
understand international markets and the role of the U.S. in the global economy
as well as the domestic impact of changes in the value of the dollar. This lesson
is especially relevant in a government or economics class but may be used in any
social studies class in which current events are discussed.
Materials
Needed: Procedures:
1.
Introduction / Background
Give your students the following background on
international exchange: Since
the 1970s most of the Western world has had floating exchange rates for their
currencies. This means that the value of each currency is measured against the
value of every other, as determined by supply and demand. In such a market, exchange
rates are determined by what consumers want. Sometimes
governments try to keep their currencies at a certain level by manipulating the
market. To do so they must absorb surpluses or deficits by selling reserves or
borrowing. (Examples: the U.S. formerly pegged its exchange rate to the value
of gold and dollars were convertible into gold; currently some countries such
as China peg their exchange rates to the value of the U.S. dollar) The
value of the U.S. dollar has been declining rapidly against other world currencies
such as the Euro and the Yen since 2002 at least. It has fallen even more dramatically
in recent months.
For
more information: Online
NewsHour: Falling Dollar (12/2/04)
http://www.pbs.org/newshour/bb/economy/july-dec04/dollar_12-2.html U.S.
Treasury Department: Exchange stabilization fund
http://www.ustreas.gov/offices/international-affairs/esf/ History
of the dollar
http://www.pbs.org/wgbh/commandingheights/lo/countries/us/us_money.html When
currencies begin to float
http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_currenciesfloat.html Online
NewsHour: Dollar's Decline (5/27/03)
http://www.pbs.org/newshour/bb/economy/jan-june03/dollar_05-27.html A
Journalist's Guide to Economic Terms
http://www.facsnet.org/tools/ref_tutor/econo_term/glossary.html 2.
Article Analysis
Ask
your students to read the following NewsHour Extra article on the fall of the
dollar.
U.S. Dollar Hurting Tourists and Global Businesses
http://www.pbs.org/newshour/extra/features/july-dec04/dollar_12-06.html Discuss.
What does it mean to say the dollar has dropped or is weak? Relative to what?
Why has the dollar dropped? Is the fall of the dollar something they should worry
about? Why or why not? 3.
Activity: Weak Dollar Give
your students the Handout and ask them to complete it. Provide them with the following
resources and any others you deem relevant: - computers
with Internet access
- the
following Web sites where students may begin their research, as well as any of
the specific Internet sources given above
www.pbs.org
www.treasury.org - economics
textbooks (if possible) and other references on macroeconomics and international
markets.
Students
may work in pairs or small groups while conducting Internet research but should
complete their handouts individually. Alternatively, you may provide printouts
from the Web sites or assign Internet research as homework, as appropriate. You
may wish to have students answer the last question on the handout for homework
and discuss their answers when they come to class the next time, prior to their
turning in their papers. Extension
Activities: 1.
Have your students learn more about international trade. What are the benefits?
The disadvantages? What is free trade? What barriers to free trade can and do
exist (sanctions, tariffs, governmental policies, etc.)? Why? 2.
Have students learn more about the history of the dollar and the international
currency exchange market. What historical role did gold play in the value of the
dollar? What are floating and fixed currencies? Why do some nations fix their
currencies and others allow them to float? National
Standards
McRel
Compendium of K-12 Standards Addressed: Economics
Standard 3: Understands the concept of prices and the interaction of supply and
demand in a market
Benchmark 3: Understands that changes in supply or demand
cause relative prices to change; in turn, buyers and sellers adjust their purchase
and sales decisions
Benchmark 4: Understands that a shortage occurs when buyers
want to purchase more than producers want to sell at the prevailing price, and
a surplus occurs when producers want to sell more than buyers want to purchase
at the prevailing price
Benchmark 5: Understands that shortages or surpluses
usually result in price changes for products in a market economy Economics
Standard 10: Understands basic concepts about international economics
Benchmark
4: Understands that a change in exchange rates changes the relative price of goods
and services traded by the two countries and can have a significant effect on
the flow of trade between nations and on a nation's domestic economy
Benchmark
5: Knows that a nation pays for its imports with its exports
Benchmark 6:
Understands that public policies affecting foreign trade impose costs and benefits
on different groups of people (e.g., consumers may pay higher prices, profits
in exporting firms may decrease), and that decisions on these policies reflect
economic and political interests and forces National
Council for the Social Studies Thematic Strands
(http://www.socialstudies.org/standards/):
Production,
Distribution, and Consumption
Global Connections Author
Lara Maupin has a Master's Degree in Secondary Social Studies Education from George
Washington University and a Bachelor's Degree in Anthropology and Philosophy from
Mount Holyoke College. To
find out more about opportunities to contribute to this site, contact Leah Clapman
at extra@newshour.org. | 
