An exchange rate is the price of one nation’s currency in terms of another nation’s currency. Like other prices, exchange rates are determined by the forces of supply and demand. Foreign exchange markets allocate international currencies.
This activity provides an opportunity for students to participate in a simulated foreign exchange market. As they experience the need to exchange currencies to purchase foreign goods, they learn about the difference between the domestic and international values of a currency and how factors of supply and demand work to set international exchange rates.