Currency II: Foreign Exchange | Cash Course | PragerU Kids

hey cash course fans before we start the show remember that you can get hundreds of free educational videos for all ages at pregnant kids.com subscribe today and never miss an episode bro what are you doing counting Yen Yen what is a Yen it's the currency of Japan the country we're going to wait a second you're telling me that you need different money to go to Japan yeah I thought everyone knew that well that's just great cuz I guess now I don't have any time to please air Auto flight 1776 for Tokyo is now delayed looks like you have time for another episode of each country around the world has its own currency which is used to purchase goods and services for example in Mexico they use the peso in Japan they use the Yen and in the UK they use the British pound when people travel or trade internationally they usually must exchange their money for the currency to say take a taxi or eat at a restaurant so since we're going to Japan I'm going to need some Japanese Yen isn't that what I said earlier exchanging currency like the peso for us or the Yen for British pounds is subject to an exchange rate this is the difference in value when you exchange one currency for another and it fluctuates constantly due to forces of supply and demand which can be affected by a country's economic financial and political situation official exchange rates are set by the Foreign Exchange Market the global Marketplace for trading one nation's currency for another the Forex as it's called is an electronic network of traders that facilitates currency conversion for international trade and Investments so how do you do an exchange let's say you're going to France wait a second I thought we're going to Japan we are we are just keep listening will you this means you'll need to acquire Euros the currency used in France if the exchange rate for US dollar to euro is 0.85 this means $1 us equals 0.85 so if you trade $1,000 you'll get $850 in exchange if at the end of your trip you have € 100 remaining and the exchange rate is the same exchanging it back to usar will leave you with $17.65 Who you calling calling the Yen store there's no such thing as a Yen store what he's right Mushy Mushy places to exchange currencies include Banks ATMs airport kiosks hotels tourist centers and independent dealers you should know however that the officially listed exchange rate is usually not the price you'll pay when exchanging at any of these locations at most currency exchange dealers two prices are usually listed for any exchange that's different from the official exchange rate one is the price at which dealers are willing to buy a currency and one is the price at which they're willing to sell the difference between the two prices is called the spread which is how the dealer makes a profit exchanging currencies does my $1 here buy the same amount as in another country no every currency is valued differently some are considered strong and some are considered weak when compared to other currencies this can affect what can be purchased with the same amount of money in another country in the local currency this is called purchasing power for example if $1 buys a cup of coffee in the United States that same dollar may buy two cups in China or half a cup in Switzerland in this case the dollar is stronger and has more purchasing power in China while it's weaker and has less purchasing power in Switzerland the relative strength or weakness of a country's currency doesn't just impact Travelers but also international trade and Investments the country's standard of living and the cost of everyday items that people depend on like food and energy attention please now that you know more about exchange and currencies Let's Take Action first experiment find a friend who owns some foreign currency and try to trade a small amount with him or her at the current exchange rate the next day or week try the trade again at the new current exchange rate and observe how the results differ second compare it can be fun to see the purchasing power of your money in different countries for example the Big Mac index lists how much it would cost in US dollars to purchase a Big Mac in other countries some charts compare other items like coffee and soda third shop around if you're planning to travel internationally check the exchange rate of the US dollar and the currency of the country you are visiting different places will have different spreads so try to find the best deal check with your bank first which will often have a more favorable rate than other places knowing how foreign exchange Works can increase your understanding of how currencies work within the global economy it will also make you a more 7y spender by maximizing your purchasing power when traveling abroad want to do an exchange sure attention air autoflight 1776 is now boarding for service to Japan a please report to gate F5 immediately wait a second this isn't what that kiosk was offering Exchange rookie wait wait a second where you going watch more at pruk kids.com and parents don't forget to subscribe