TOURISM TERM 2 GRADE 12 Topic: Foreign Exchange

1TOURISMTERM 2GRADE 12Topic: Foreign ExchangeGr 11: Revision of conceptsCurrencyMoney, in the form of paper or coins, used as a medium ofexchange for goods and services.Local currencyThe currency of a particular country where a transaction isbeing carried out.ForeigncurrencyA currency or currencies not belonging to your own country.Compiled by E Ferreira (SES: Services Subjects NMB District)

2ForeignExchangeThe practice of converting one currency into another currency.Rate ofExchangeThe value of one country’s currency in relation to anothercurrency.The RoE will determine how much foreign currency you willreceive, when you exchange your money.FluctuationChanges in currency value in relation to another currency.Compiled by E Ferreira (SES: Services Subjects NMB District)

3GRADE 12Topic: Foreign ExchangeGrossDomesticProduct (GDP)The GDP is the total value of all goods and services producedwithin a country during a period of time (per quarter/per year).The GDP isused tomeasureeconomicprogress in acountry If GDP is rising, the economy is good, and the nation ismoving forward If GDP is down, the economy is in trouble and the nation islosing groundBenefits ofGDP growth toSA economy Income generationEmployment / job creationInfrastructure improvementSkills developmentCompiled by E Ferreira (SES: Services Subjects NMB District)

4The MultiplierEffectThe multiplier effect is when money, spent by tourists, filtersdown through the economy benefitting employees and otherbusinessesTourists spend money when traveling.This money goes into the local economy.This money is then spent by local businesses to purchasegoods and pay employees.The multipliereffect and itslink to the GDPThe buyingpower of theRand This re-spending of the money expands the local economy,creating the multiplier effect.The value of expenditure is multiplied and has a positiveeconomic effectMoney spent in a particular area helps to create jobsThe jobs, in turn, create demand for other products &services in the local economyMoney therefore filters through to all levels of the economyThe amount of foreign currency you can buy with your Randis referred to as the buying power of the RandIf the Rand can buy a lot of the other currency, we say theRand is strong in relation to the other currencyIf the Rand can only buy a little of a particular currency, wesay that the Rand is weak in relation to that particularcurrencyCompiled by E Ferreira (SES: Services Subjects NMB District)

5If the Rand isstrong If the Rand isweak The relativestrength orweakness of acurrency atspecific times the foreign tourists will receive less Rand’s for their currency foreign tourists will have less money to spend inbound tourists will visit for a shorter period or will not visit atall tourism will contribute less to South Africa’s GDP and theeconomy will decline it can lead to job losses it will attract more inbound international tourists to SouthAfrica foreign tourists will receive more Rand’s for their currency foreign tourists will have more money to spend (greaterspending power) in the local economy during their visit a greater demand for tourism products and services iscreated as the international tourists will spend more in SouthAfrica foreign tourists will get more value for their money and willtherefore spend more an increased demand for tourism products will lead to agrowth in the GDP and will have a positive impact on theeconomy more job opportunities are created tourists can retain their original budget and have moremoney at their disposal tourists will be able to reduce their original budget makingtheir trip less expensive tourists will use this opportunity to purchase more foreigncurrency needed for the intended journey tourists might extend their length of stayThis can be influenced by: Political unrest / instability / acts of terrorism / high crimerates Natural disasters / drought / water crisis Unforeseen events / disease outbreak / economic recession Negative credit ratings / junk status Corruption in government Discovery of new or large amounts of mineral resources Hosting of successful global events Interest rates Positive / negative image of the country in media reportingCompiled by E Ferreira (SES: Services Subjects NMB District)

6Interpret acurrency ratesheet A currency rate sheet is a list of the rates of exchange(RoE) at which foreign currencies are bought and sold. This rate will determine how much foreign currency you willreceive, when you exchange your money. Foreign currencies are displayed by a three-letter code The first two letters refer to the name of the country and the3rd letter refers to the currency Most currencies also have a symbol to indicate thecurrencyRounding off totwo decimalplacesBank SellingRateThe rate at which the foreign exchange dealers e.g.commercial banks, will sell foreign currencyBank BuyingRateThe rate at which the foreign exchange dealers e.g.commercial banks, will buy foreign currencyWhen doing aforeignexchangecalculationalways look at itfrom the SouthAfrican Bank’spositionWhat is the Bank doing with the foreign currency? Is the bank selling foreign currency? (BSR) Is the bank buying foreign currency? (BBR)Compiled by E Ferreira (SES: Services Subjects NMB District)

7When doingforeignexchangecalculationsremember to: Identify the currencies that you will be working with in thecalculation Decide if you must multiply or divide by the Rate of Exchangewhen doing the calculation Convert from ZAR to a major foreign currency: DIVIDE Convert from major foreign currency to ZAR: MULTIPLY Establish the Rate of Exchange to be used in the calculation: Bank Selling Rate OR Bank Buying RateWhat isthe Bankdoing withtheforeigncurrency? Do the calculationShow ALL the steps of your calculationRound off your answer to TWO decimal placesThe currency youhave x BBR thecurrency you willhave after theexchangeCompiled by E Ferreira (SES: Services Subjects NMB District)GBP 4 000,00 x 18,02 ZAR 72 080,00

8The effect ofexchangerates oninternationaltourismFluctuationsin exchangerates Changes in the value of a currency in relation to anothercurrency Currencies fluctuate based on supply and demand Supply and demand are linked to various factors e.g. thecountry's monetary policy, the rate of inflation, political andeconomic conditions in the countryCompiled by E Ferreira (SES: Services Subjects NMB District)

A currency rate sheet is a list of the rates of exchange (RoE) at which foreign currencies are bought and sold. This rate will determine how much foreign currency you will receive, when you exchange your money. Foreign currencies are displayed by a three-letter code The first two letters refer to the name of the country and the