Gauteng Department of Education 12... · Web viewForeign exchange: Countries using Euro as their currency are all part of the European Zone: ... There are a lot of factors that can

Tourism Grade 12 Extra notes and homework Term 2

Grade 12 Tourism 2015Foreign exchange:

Countries using Euro as their currency are all part of the European Zone: Currently it is 19 of the 27 countries – LEARNERS GOOGLE AND CONFIRM THE NUMBER OF COUNTRIES

Austria, Belgium, Cyprus, Estoria, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxemburg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain

GDP: Is the measure of a given country’s national income. It is a measure of all the goods and services produced domestically, usually in a period of one calendar year. The components include the consumer spending, investments, value of exports minus the value of imports and the government spending. If there was a rise in the production of goods it means the GDP is growing. A higher GDP leads to higher standard of living. There will also be more money available for social programmes by government

Tourism multiplier effect:Tourism not only create jobs in the tourism industry, it also encourages growth in other sectors on the industry. This is known as the tourism multiplier effect. It means this is how many times money spent by a tourists circulates through a country’s economy.

Multiplier effect and the GDP:It is also an effect in which an increase in spending produces, an increase in national income and consumption greater than the initial amount spend. Every time money changes hands it provides new income.

Strong and weak randIt is used to describe the value and strength of the SA Rand against other currencies. This is also called the buying power of the currencyStrong rand (GO pack your bags you will pay less)A “strong rand” means that when we want to buy another currency, we will pay less rand than normal for that currency.When the rand is strong, South Africans can go to London because they will pay less rand per pound (greater buying power of the rand) thus we will be spending less of our money BUT it makes exports more expensive.

Weak rand (STOP don’t travel you will pay MORE)A ‘weak rand’ means that when we want to buy another currency, we will pay more rand than normal for that currency. When the rand is weak British people will travel to SA because they will get more rand per pound (poor buying power of the rand). South African travellers will pay more of our currency to get foreign currency. A weak rand has a decreased value compared to the US dollar.

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Factors influencing the rand:

Factors Contribute to weak currency Contribute to strong currencyInterest rate Lower interest rates Higher interest ratesInflation Higher inflation rates Lower inflation ratesPolitical and economic stability or instability

Political unrest and collapsing economy

Political and economic stability within the country

Effect of strong or weak rand

Effect of a weak currency for SAWeak rand (STOP don’t travel you will pay MORE)

Effect of a strong currency for SAStrong rand (GO pack your bags you will pay less)

It is good for nations that have more exports than imports

It is good for nations that have more imports than imports

It will stimulate manufacturing and export Imported goods like fuel will be more affordable

More manufacturing mean more job creation Domestic manufacturing will increase

More foreigners will be able to afford to visit the country as it will increase their buying power.

Fewer foreigners will be able to afford to visit the country as it will decrease their buying power.

Imports are more expensive Exports are more expensive

Higher prices for imported items thus cost of living is higher

Less exports

Our buying power will be weaker Our buying power will be stronger

It will make travel more expensive for SA thus x for travel overseas, we will stay home

It will make travel more affordable for SA thus for travel overseas

The effect of exchange rates on international and South African travel patterns

How exchange rate affect inbound tourists? How exchange rate affect outbound tourists? How exchange rate affects travel in developing countries? How exchange rate affects travel in developed countries?

How exchange rate affect inbound and outbound tourists? Inbound tourists – coming from a foreign country into SA thus International tourists Outbound tourists- leaving their country to visit another country The exchange rate is the price international travellers pay for foreign currency. Exchange

rates can impact the tourism industry either negatively or positively.

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A fall in the value of the ZAR: A fall in the value of the SA Rand (ZAR) has a twofold effect: (mostly positive)

It makes international travel for South Africans more expensive BUT then people will travel more domestically

It makes travelling to and in South Africa cheaper or more affordable for foreign tourists.

Such a situation may lead to growth of South Africa’s tourism industry, as more South Africans holiday domestically instead of travelling overseas.

It can also lead to more foreigners visit SA to take advantage of the cheaper exchange rate. A cheaper exchange rate gives foreigners more ZAR for their currency, effectively giving them more to spend in SA.

A rise in the value of the ZAR (South African rand) : It has a negative effect on the tourism industry An increase in the value of the rand means that less foreigners visit SA because they

pay more for a holiday in SA. This may cause them to look elsewhere for cheaper destination.

It also means more South Africans travel abroad or overseas instead of travelling domestically, because it is cheaper to abroad.

How exchange rate affect travel patterns? Tourist travel patterns are influenced by the exchange rates as they affect the tourists

buying power (also called purchasing power). Tourists visiting SA from another country will have more or less money to spend

depending on the exchange rate. South Africans visiting other countries will also depend on the exchange rate because it

effect the amount of foreign currency they have to spend. Strong rand : more SA travel abroad and less international tourists visiting SA. Weak rand : more SA travel domestically and more international tourists visiting SA

How exchange rate affects travel in developed and developing countries? Developed country – economy is stable and politics more stable, thus more prosperous

country. Developing country – economy still growing. If you travel to a developed country you will not be able to buy as many goods and

service as in a developing country. If you travel to a developing country that is also poorer in relation to your country, you

will be able to buy more goods and service for the same amount of money. Example: Germany holiday versus Zimbabwean holiday

Germany is a more expensive developed country, if a South African wish to travel to Germany the travellers will have less buying power than at home.

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If a South African wish to travel to a developing country which is poorer and is a cheaper destination than SA, such as Zimbabwe, the traveller will have more buying power than at home.

The effect of currency fluctuations The foreign exchange market is a huge trade market. Huge amounts of currencies are

bought and sold. There are a lot of factors that can determine the exchange rate. The factors are related

to the trading relationship between two countries and the countries’ economic policies.

Factor Explanation

Inflation A country with a lower inflation rate shows a rising currency value, its buying power increases in relation to other countries

Interest rates Higher interest rates attract foreign money and investors and cause the exchange rate to rise.

Trade balances If SA spend more than what SA earn we need to borrow money from other countries, that will lower the exchange rate

Terms of trade If SA have a greater demand for our exports it also means a bigger demand for our currency and then it increase the currency’s value

Government debt Countries with large government debts are less attractive for foreign investors, leads to a decrease in the value of the currency.

Political and economic instability

Instability cause a loss of confidence in the currency, investors will move their money to currencies that are more stable. Leads to a decrease in the value of the currency.

Employment outlook of a country

An increase in unemployment sow a slowdown in the economy. This lead to a decrease in the value of a country’s currency because of declining confidence in the currency and lower demand.

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Homework:

1. Study the picture and write a paragraph explaining how inbound international tourists can benefit the local people directly and indirectly. Use full sentences.

2.

Explain in a paragraph how the multiplier effect link to the GDP of South Africa.

3. How did the political problems and shootings at the University during March 2015 in Nigeria influence the value of their currency?

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4. Study the following table below and then answer the questions that follow:

4.1 In which month and year was the rand the weakest against the British pound?4.2 In which month and year was the rand the strongest against the British pound?4.3 In which month and year will be it be more affordable for South Africans to travel?4.4 In which month and year will be it be more affordable for the British to travel?4.5 What was the possible effect of the rand value on the number of British tourists visiting SA during February 2008?

4.6 .

4.6.1 Calculate the amount in rand that family 1 would receive for their British pounds.4.6.2 Calculate the amount in rand that family 2 would receive for their British pounds.4.6.3 Calculate the amount in rand that family 3 would receive for their British pounds.4.6.4 State which one of the three families benefited the most from their visit to South Africa. Give ONE reason for your answer

4.7. 5 000 Scottish tourists visited South Africa in April 2008 and each of them spent an average of 500 GBP. Calculate the total amount to be spent by the Scottish tourists.

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Three families (Family 1, family 2 and family 3) from England won a prize of £900.00 each. Family 1 toured South Africa in Nov 2007, family 2 toured South Africa in Feb 2008 and family 3 toured South Africa in Nov 2008.

Nov '07

Dec '07

Jan '08 Feb '08

Mar '08

Apr '08 May '08

Jun '08 Jul '08 Aug '08

Sep '08

Oct '08 Nov '08

£0.00

£2.00

£4.00

£6.00

£8.00

£10.00

£12.00

£14.00

£16.00

£18.00

12.01 12.32 12.56

7.53

13.23 13.50 13.60 13.70 13.80 14.20 14.3515.32

14.50

The value of the Rand in relation to the British Pound

Rand value


5. Study the following currency rate and answer the questions that follows:

5.1 What is the exchange rate for the following currencies?a. I am buying Swiss Franc notesb. The bank is sell Euro notesc. The bank buy Australian Dollar Traveler chequesd. I am selling my extra Pound notes

Questions 6-17 study the conversion table and answer the questions:

Country (4 March 2014) Exchange rateUSA 10.8198EURO 14.8899United Kingdom 18.0797Japan 0.1065Australia 9.6572

6. Compare what Belgium and the USA tourists would contribute in ZAR if they each spent 500 of their own countries currency in South Africa.

7. A young South African couple go to London for 6 months on a working holiday. They each take R20 000. They stay with a family and each spend 1 000.00 British pounds worth of that money while they are there. They each manage to earn 500.00 British Pounds per month. What amount in rands will they be able to bring back to South Africa at the end of their stay?

8. Give a list of 10 countries using the Euro.

9. A bottle of South African wine costs R95.00. Calculate the cost in Yen.

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10. The cost of a movie ticket in South Africa is R58.00. Calculate the equivalent cost in US Dollars.

11. In England, a meal of fish and chips with a green salad is £3.50. Calculate the equivalent cost in SA Rand.

12. In Paris, a ride to the top of the Eiffel Tower cost R680.Calculate the equivalent cost in their currency.

13. The price of a CD in Japan is ¥4200. Calculate the equivalent cost in SA Rands

14. Upon arrival is South Africa, a British tourist decides to exchange GBP 420 to ZAR. Calculate the total amount the tourist received in Rands.

15. An American tourist travels to South Africa to run the annual Comrades Marathon. His trip will cost him US$6 456.67. How much will it be in Rands?

16. The president of South Africa wants to visit a few European countries whilst on holiday. His whole trip will cost R690 000. How much will this be in European currency?

17. A British tourist spends 2 457.00 Pounds on accommodation, 428.00 Pounds on car hire and

50 Pounds a day for 10 days on activities and sightseeing.a. How much will she/he spend altogetherb. How much will that be in South African Rand

18. Exchange rates are sometimes quoted in two columns on an exchange rate sheet: a Bank Buying Rate and a Bank Selling Rate. Explain this statement.

19. How does the exchange bank make a profit when buying or selling foreign currency? 20. Explain in a paragraph when the exchange rate can have a positive effect on the travel patterns of South Africans travelling abroad.

21. Read each of the following scenarios and state whether each will cause a rise or fall in the country’s exchange rates. 21.1 Country A has maintained low levels of inflation over the last ten years. 21.2 Country B offers investors high interest rates. 21.3 Unemployment levels in country C have increased each year for the past 6 years. 21.4 Country D is experiencing a civil war and political turmoil. 21.5 The demand for country E’s exports has steadily increased over the past five years.

Homework: MEMORANDUM

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1. Study the picture and write a paragraph explaining how inbound international tourists can benefit the

local people directly and indirectly. Use full sentences. When a tourist visit the area they will pay for the hotel and transport. The hotel and transport can then pay their bills and they will directly benefit from the money paid by the tourist. Then the hotel can pay salaries. The hotel receptionist can then pay her bills and buy food from the local supermarket, the local supermarket will then indirectly benefit from the money paid by the tourist. The person who provided food and furniture to the hotel will also benefit indirectly.

2. Explain in a paragraph how the multiplier effect link to the GDP of South Africa. It is created when money filters down through the economy and in the process benefits

different organisations. Foreign exchange – income for the country thus for the GDP of the country. Direct effect – income for owner of hotel, income for staff, interest paid to the bank, marketing

costs Indirect effect – farmer’s income, cleaners, raw materials, machinery costs, transport costs

It is also an effect in which an increase in spending produces an increase in national income and consumption greater than the initial amount spend.

3. Will be negative because people will be scared to visit the country or won’t want to invest in the country anymore, the money of the country will be weaker

4.1 In which month and year was the rand the weakest against the British pound? October 2008

4.2 In which month and year was the rand the strongest against the British pound? February 2008

4.3 In which month and year will be it be more affordable for South Africans to travel? February 2008

4.4 In which month and year will be it be more affordable for the British to travel? October 2008

4.5 What was the possible effect of the rand value on the number of British tourists visiting SA during February 2008? Negative, it is not affordable for them to travel because they will only get R 7.53 for every pound.

4.6.1 Calculate the amount in rand that family 1 would receive for their British pounds.£900.00 x 12.01 = R10809.00

4.6.2 Calculate the amount in rand that family 2 would receive for their British pounds.£900.00 x 7.53=R6777.00

4.6.3 Calculate the amount in rand that family 3 would receive for their British pounds.£900.00 x 14.50 = R13050.00

4.6.4 State which one of the three families benefited the most from their visit to South Africa. Give ONE reason for your answer Family 3 because they will get the most Rands for their £900.00

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4.7. 5 000 Scottish tourists visited South Africa in April 2008 and each of them spent an average of 500 GBP. Calculate the total amount to be spent by the Scottish tourists.£500x 13.50 = R6750.00 x 500 tourists = R3 375 000.00

5.1 What is the exchange rate for the following currencies?a. I am buying Swiss Franc notes a. 0.0992b. The bank is sell Euro notes b. 12.1575c. The bank buy Australian Dollar Traveler cheques c. 0.1134d. I am selling my extra Pound notes d. 13.6024

6. Compare what Belgium and the USA tourists would contribute in ZAR if they each spent 500 of their own countries currency in South Africa.Belgium: €500 x 14.8899 = R7444.95USA: $500 x 10.8198 = R5409.90 The Belgium will spend more ZAR than the Americans

7. A young South African couple go to London for 6 months on a working holiday. They each take R20 000. They stay with a family and each spend 1 000.00 British pounds worth of that money while they are there. They each manage to earn 500.00 British Pounds per month. What amount in rands will they be able to bring back to South Africa at the end of their stay?R20 000 x2=R40 000 ÷ 18.0797 = £2212.43£2212.43 - £2000 = £212.43£500 x 2 people x 6 months = £6000£6000 + £212.43 = £6212.43£6212.43 x 8.0797 = R112 318.87

8. Give a list of 10 countries using the Euro.Greece, France, Netherlands, Germany, Finland, Austria, Spain, Portugal, Italy, Cyprus

9. A bottle of South African wine costs R95.00. Calculate the cost in Yen.R95.00 ÷0.1065 = ¥892.02

10. The cost of a movie ticket in South Africa is R58.00. Calculate the equivalent cost in US Dollars.R58.00÷10.8198 = $5.36

11. In England, a meal of fish and chips with a green salad is £3.50. Calculate the equivalent cost in SA Rand.£3.50x 18.0797 = R63.28

12. In Paris, a ride to the top of the Eiffel Tower cost R680.Calculate the equivalent cost in their currency.R680 ÷14.8899 = R10 125.13

13. The price of a CD in Japan is ¥4200. Calculate the equivalent cost in SA Rands¥4200x 0.1065 = R447.30

14. Upon arrival is South Africa, a British tourist decides to exchange GBP 420 to ZAR. Calculate the total

amount the tourist received in Rands.

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£420x 18.0797 = R7 593.48

15. An American tourist travels to South Africa to run the annual Comrades Marathon. His trip will cost him US$6 456.67. How much will it be in Rands?US$ 6 456.67 x10.8198 = R 69859.88

16. The president of South Africa wants to visit a few European countries whilst on holiday. His whole trip will cost R690 000. How much will this be in European currency?R690 000 ÷ 14.8899 = €46 340.14

17. A British tourist spends 2 457.00 Pounds on accommodation, 428.00 Pounds on car hire and 50 Pounds a day for 10 days on activities and sightseeing.

a. How much will she/he spend altogether£2457.00 + £428.00 + (£50 x 10= £ 500)= £3385

b. How much will that be in South African Rand£3385 x 18.0797 = R61 199.79

18. Exchange rates are sometimes quoted in two columns on an exchange rate sheet: a Bank Buying Rate and a Bank Selling Rate. Explain this statement. Bank Buying Rates (BBR)

The rate at which the bank is buying foreign currency in exchange for local currency [convert foreign currency into local currency]

The rate at which ABSA is converting dollar into rand. You want to sell dollars and the bank will buy dollars.

Bank Selling Rates (BSR) usually higher. The rate at which the bank is selling foreign currency [convert local currency into foreign

currency] ABSA is converting rand into dollars. You want to buy dollars and the bank is selling dollars.

19. How does the exchange bank make a profit when buying or selling foreign currency? The bank will make money due to commission, when they sell a currency for more than they paid for it

20. Explain in a paragraph when the exchange rate can have a positive effect on the travel patterns of South Africans travelling abroad.

Tourist travel patterns are influenced by the exchange rates as they affect the tourists buying power (also called purchasing power).

Tourists visiting SA from another country will have more or less money to spend depending on the exchange rate.

South Africans visiting other countries will also depend on the exchange rate because it effect the amount of foreign currency they have to spend.

Strong rand : more SA travel abroad and less international tourists visiting SA.

21. Read each of the following scenarios and state whether each will cause a rise or fall in the country’s exchange rates. 21.1 Country A has maintained low levels of inflation over the last ten years. Rise21.2 Country B offers investors high interest rates. Rise21.3 Unemployment levels in country C have increased each year for the past 6 years Fall21.4 Country D is experiencing a civil war and political turmoil. Fall

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21.5 The demand for country E’s exports has steadily increased over the past five years. Rise

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Documents

Gauteng Department of Education 12... · Web viewForeign exchange: Countries using Euro as their currency are all part of the European Zone: ... There are a lot of factors that can