Money Lessons



	The 2008 Summer Olympics took place in the Chinese capital of Beijing. Many people traveled to China for the Olympics, including athletes, coaches and fans. How did they pay for expenses such as hotel rooms, food, tickets and souvenirs? Did Americans use U.S. dollars? Did the English pay in British pounds? Or did everyone from different countries use Chinese money to pay for their expenses?

	The Chinese currency, or money, is called the “Yuan.” China issued a new 10-yuan note to commerate the 2008 Summer Olympics. The currency features the National Stadium (site of the Olympics) and the 2008 Olympic motto: “Chinese seal, Dancing Beijing.”

Exchange Rates
Currencies can be exchanged, or traded, for other currencies. This exchange takes place at major banks and airports. An exchange rate states how much of one currency is equivalent to another currency. For example, 1 U.S. dollar = 7 Chinese Yuans. Exchange rates are also used to figure out equivalent costs. If a book costs 8 U.S. dollars, then it also costs 56 Chinese yuans.

Think About It
An exchange rate is just a ratio that expresses the relationship between currencies.


Your Turn There are many hotels in Beijing. If the average price of a hotel room per night is 3,150 Yuans, how much does the hotel room cost in U.S. dollars? (Assume an exchange rate of 1 U.S. $ = 7 Chinese Yuans). Answer is found at the end of Money Lessons.


Beware of changing rates! Exchange rates are constantly changing because the value of money changes. There are two types of money: fixed and floating. Fixed currency has a fixed, or constant, value. Floating currency, such as the U.S. dollar, has a value that is determined by the supply and demand for the U.S. dollar. Expectations, or what people think, about a country’s economy also influences money value.

Tip: Check the Internet to find the most recent exchange rates. To practice converting currencies, visit www.finance.yahoo.com/currency.

The Dollar and the Yuan In January of 2008, 1 U.S. dollar was equal to about 7.2 Yuans. By July 10, 2008, 1 U.S. dollar was equivalent to about 6.8 Chinese Yuans. This means that from January to June, the Yuan strengthened relative to the dollar, because the U.S. dollar can buy less Yuans than it could just 6 months ago!

Think About It
In January, 1,000 U.S. dollars = 7,200 Chinese Yuan.
In July, 1,000 U.S. dollars = 6,800 Chinese Yuan.
That’s a difference of 400 Chinese Yuan (or about $57)!

Money Lessons Answer: 3,150 Yuans = 450 U.S. dollars