ObjectivesIn this lesson, students will:
Appropropriate Grade Level, 4-8
Duration, 1-2 class periods
MSPP Outcomes:
Teacher Background Information:
Vocabulary to introduce prior to lessoncurrency, exchange, market, trade,
Materials Needed:For the lesson, each individual student or group of students will need copies of:
It may also be helpful to have several calculators available for student use.
Teaching tips and options for this lessonIntroductionIn this section of the lesson, students are asked to think about what would happen if the price of a common good (a compact disk) doubled. This has not actually happened in South Korea, but it is a good introduction to the effects of a currency crisis in a nation. You may wish to take a few minutes to have students speculate on the social, political, and economic effects of such a drastic increase in the price of an important good such as gasoline. Remember, you may recall the gas crisis of the 1970s, but your students have no first hand experience with significant inflation. At any point in the lesson it may also be valuable to mention that other countries were also hit by falling currency values. Thailand was the first, South Korea the second, and Indonesia the last. At this writing the social and political effects of the crash in Indonesia seem to be the most visible, with student rioting in the streets. One reason South Korea was chosen for this lesson is that the effects of the currency crash are not as visible or dramatic in that country (and for the fact that Pride II will be visiting Korea in June). In this section of the lesson, students examine the current value of the won in relation to the United States dollar. It would be useful here for the teacher to point out that all currencies are traded in exchanges. One could use won to buy British pounds or Japanese yen as easily as to buy dollars. The specific exchange rates, however, would be very different. The student first finds out the current exchange rate using the Yahoo! Finance - Currency Converter. This data is entered on the Currency Exchange Worksheet where the student then calculates the won value of an American car, and the dollar value of a Korean car. For younger students it may be necessary for the teacher to assist with these calculations. The answers for these questions are given below. Students then examine the changing value of the won by looking at the Daily Exchange Rate Graph which shows the number of US dollar per South Korean won from January 1997 to May 1998. This graph sheet has several questions that may be used for students with adequate mathematics skills. The answers for these questions are given below. With this data, the student will go to the Changes in Exchange Rates Worksheet and calculate the won value of the American car and the dollar value of the Korean car in January 1997 and January 1998. Note the exchange rates have been simplified somewhat to facilitate the calculations. The answers for these questions are given below. From this exercise it will be obvious that when a currency changes this drastically, the effect on the prices of imports and exports will be significant. Most products, however, are not affected in this simple a way. The next activity asks students to examine five articles from the on-line version of the Korea Herald newspaper to see some more subtle changes which arise from the currency crisis. After they read the articles they should fill in the Effects of the Economic Crisis in South Korea Worksheet . Answers for this worksheet are found below. Finally students are asked to examine five statements about the effects of the currency crisis and determine if the statements are true or false. Students may click on the statement to see the answer. An alternative to this would be to print out the statements and use them for class discussion. The lesson ends with some hope for the South Korean won. As students say form the graph, the won has recovered some of its value from the low point in late December. While the cartoon of the won rising is a bit exaggerated, clearly the South Korean economy is on the road to recovery.
Possible ExtensionsA page of Web links is given for the student to explore the effects of the currency crisis in other Asian countries. One logical extension would be to examine the situation in Indonesia in which the economic effects seem likely to spill over into the political arena. Graphs of the dollar value of the Indonesian rupiah can be printed from the A HREF="http://pacific.commerce.ubc.ca/xr/">PACIFIC Exchange Rate Service Web site. The advanced student could also examine the currency speculation which was a major cause of the currency crisis in 1997. The "Out There News" page on the economic crisis is especially helpful in explaining some of the more complex causes of these events. The New York Times and Economist pages are also valuable. Note - the causes of the currency crises are very complex. Most children (and adults) will have difficulty with this extension. Answers to the Currency Exchange WorksheetOn May 12, 1998, $1 was worth 1,383 won. At that exchange rate the $20,000 Ford would be worth 27,660,000 won. The won was worth $.000717875 making the 15,000,000 won car worth $10,768. These figures will change as the $/won exchange rate changes. Answers to the Daily Exchange Rate Graph Questions
Changes in Exchange Rates WorksheetJanuary, 1997 - Korean car = $17,850; American car = 16,800,000 won January, 1998 - Korean car = $9,000; American car = 33,200,000 won Effects of the Economic Crisis in South Korea WorksheetDecember 20, 1997 - "Gasoline Price to Rise to 1,135 Won in January" - gasoline prices rise due to decrease in the value of the won. Note that oil prices are quoted in dollars in international markets, thus when the value of the won decreases, the price of oil increases. Gas prices rose again in February in South Korea, but have declined somewhat since. April 18, 1998 - "Frugality Drive Leads to Reduced Waste" - to help with the economic crisis the Korean government asked its citizens to be more thrifty. One side effect of this was a decrease in the amount of trash deposited by Koreans. A question to students - would this happen in Maryland? April 24, 1998 - "Flea Markets Gaining Popularity as Economic Crisis Grips Korean Society" - again as Koreans try to economize they are not throwing out old appliances, but are re-selling these items in flea markets or swap meets. In many Asian countries the idea of buying a "used" product has traditionally been scorned. In periods of economic crises customs often change. April 30, 1998 - "Actual Unemployment Reaches 4 Million" - the most dramatic effect of the currency crisis is the rapid increase in the unemployment rate in South Korea. Economists debate the actual number of unemployed, but the effect has been significant. May 9, 1998 - "Number of Cars Decreases in Seoul" - With the price of gasoline increasing, the number of cars on the road decrease. Tire sales drop, toll collection fall, and even more people are unemployed as a result.
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