Lesson Plan

• Describe why individuals, firms and governments buy foreign currency for capital‑goods investment.
• Explain how selling foreign currency arises from export earnings, profit repatriation and debt repayment.
• Analyse the impact of these transactions on currency supply‑demand and exchange‑rate movements.
• Apply the simple exchange‑rate formula (E = D/S) to calculate cost changes.
• Evaluate policy options to manage currency fluctuations caused by capital‑goods flows.

• Projector and screen
• PowerPoint slides summarising key concepts
• Printed handout of the transaction‑flow table
• Calculators
• Worksheet with practice questions and case‑study data
• Whiteboard and markers

Begin with a quick poll: “What do you need to buy a car made in another country?” Use the responses to highlight the role of foreign currency in capital‑goods trade. Review students’ prior knowledge of exchange rates, then outline today’s success criteria: identify reasons for buying/selling foreign currency, link transactions to exchange‑rate changes, and suggest policy responses.

1. Do‑Now (5') – short quiz on basic exchange‑rate terminology.
2. Mini‑lecture (10') – introduce foreign‑exchange market, capital goods, and the five buying motives and four selling motives.
3. Table Analysis Activity (15') – in pairs, examine the provided transaction‑flow table, label each row as a “buy” or “sell” reason, and predict the effect on the home currency.
4. Case‑Study Calculation (10') – using the UK‑Japan example, students compute the GBP cost before and after a demand‑driven rate change.
5. Policy Debate (10') – groups discuss two government interventions and present arguments for or against each.
6. Check for Understanding (5') – exit ticket: one sentence summarising how capital‑goods imports affect exchange rates.

Recap the main reasons agents buy and sell foreign currency in the context of capital‑goods investment and the resulting supply‑demand shifts. Students complete an exit ticket linking a specific transaction to its exchange‑rate impact. For homework, assign two practice questions from the source notes to reinforce calculation and policy‑analysis skills.