Lesson Plan

• Define nominal and real exchange rates and explain their differences.
• Calculate real exchange rates using the formula R = e × P* / P.
• Analyse how changes in nominal rates and price levels affect real exchange rates.
• Evaluate policy implications of nominal depreciation and inflation on competitiveness.
• Interpret real exchange‑rate values to assess the relative price of goods between countries.

• Projector or interactive whiteboard
• Slides with definitions, formulas and examples
• Printed worksheet containing numerical problems
• Calculators (or online calculator)
• Graph paper or digital graphing tool
• Whiteboard markers

Begin with a quick poll: “If you were traveling abroad, what would you look at first – the price of a coffee or the exchange rate?” Connect this to students’ prior experience of currency conversion and set the success criteria: students will be able to distinguish nominal from real exchange rates and explain why both matter for competitiveness.

1. Do‑now (5 min) – Students calculate a simple nominal exchange rate from provided currency‑pair cards.
2. Mini‑lecture (10 min) – Present definitions and formulas for nominal and real exchange rates using slides.
3. Guided practice (12 min) – Work through the numerical example together, filling in the data table and computing the real rate.
4. Group activity (10 min) – Teams adjust the nominal rate and price levels to observe effects on the real rate, recording results on graph paper.
5. Class discussion (8 min) – Analyse how inflation differentials influence competitiveness and link to policy implications.
6. Quick check (5 min) – Exit ticket: write one sentence explaining the key difference between nominal and real exchange rates.

Recap that nominal exchange rates are market prices while real exchange rates adjust for price‑level differences, giving a true picture of purchasing power.

For homework, students complete a worksheet converting nominal rates to real rates for two additional country pairs and prepare a short reflection on how inflation can offset nominal depreciation.