Macro 5.3- Foreign Exchange Practice

[@Adzilify]

Your videos are an excellent revision tool. Short and concise, yet packed with good and helpful information :D

[@xolisalila8106]

You are a super hero.

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*Friday $1997* My imo no is [phone]

[@HannahHinze]

Thank you for explaining this concept better than any of my three macroeconomics textbooks and teachers/TAs. An absolute godsend.

[@andrewmckenzie3361]

love the energy on this brother, put a smile on my face 10 seconds in

[@ManonLc14]

SO clear!!! Thank you so much you're saving me for my finals exams!!

[@stephaniejosine]

Exchange rates have always baffled me, but as soon as you explained them as commodities that people buy and sell, which are subject to the laws of the AS-AD curves, it all made sense! Thank you ^_^

[@mp3ifier]

Mr. Clifford Im taking my macroecon class at my university right now, and you explain all the concepts 10 times more clear than my professor.

[@joannegriffiths8623]

So happy I found your channel.. Studying CIMA and these are a massive help .. have recommended on the UK study group

[@supermonkeywtf09]

I literally speed through every single video on this channel today in preparation for my exam tomorrow morning. Soo nervous, I hate AS level exams :((((((((((

[@masongreyer575]

Jacob Clifford you are an absolute legend

[@lisamaurer3941]

I've always had trouble wrapping my head arround exhange rates. Now I totally get it. I don't know why but I feel like american "teachers/professors" know how to explain the same basic concepts as german "teachers/professors" but much easier to understand. Thanks again.

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Still going strong man, instructors are still using your videos as teaching tools nearly 10 years later. In the words of the great T800, "I am a visual learner"

[@1rosebudsalve]

you just made my life so much easier, thank you.

[@waleedharbi1149]

Thank you Jacob. I get it from the first time!!

[@JacobAClifford]

+waleed harbi I'm glad that it makes sense. Please subscribe and telll you friends:)

[@waleedharbi1149]

+ACDCLeadership I'll. Thank you Jacob :)

[@andrewrafaelkim]

For question 3, would Japan’s higher price level also cause Americans to demand less Yen and supply less Dollars?

[@wongwinton]

Told my friends good job with your videos thanks a lot.

[@vi3tchiick]

definitely a better prof than mine

[@saravananrupa7142]

you are amazing man, it would be really great if you arrange fill in the gaps(leftover topics) according to an A and AS level textbook

[@natiXN]

also thanks from Austria helped a lot for my exam !!!

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This guy is crazy, love these tutorials though! #Life_Saver

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i love you. you saved my life as always

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That belt is really awesome and makes me learn more... haha..!!

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[@jugelstad]

THANK YOU! this was very helpful along with the previous video

[@yuyuweiwei117]

HAHAHAHA the beginning was the best part!!

[@exploringfaithwithgod2410]

Haha

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Thanks i get it now!!

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Another great video!

[@iteenie]

guess you're doing EBC 2 just like me at the WU, aren't you? :D We owe this guy A LOT!

[@Ziashefaie]

Thank you man for your best efforts

[@alone123ful]

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[@bobbyharrison9916]

For the second one: I thought cutting income taxes would increase AD because we would have more money and then shifting AD to the right would increase the equilibrium price level. And my thinking was if the price level is higher in the US because of lowered income taxes then Japan wouldn't want to buy as much of our stuff before the price is higher here and therefore the damand (by the Japanese) would go down. Am I wrong?

[@eoinomahony4756]

You're over thinking it. We cut taxes, so we have more money to spend. We spend that money in Japan making their currency appreciate. Weird, but that's the way it is.

[@Gh0stsn5tuff]

There isn't a clear cut answer. The reference rate only has value if you consider against ALL crosses. So if rising income allows higher tourism spending, but other tourist-centric countries have weaker currencies, then they would receive the impact of that difference, instead of a country like Japan which may not be as weak comparatively (its currency). Additionally, the size of the tourism sector may be insignificant to the overall size of the countries economy, so the institutions that largely set the exchange rate would not be influenced by a few tourists preferences. Finally, currency isn't consumed or destroyed when exchanged, so technically the supply doesn't change, just the preferences of its owners. That money could be reinvested in the originating country and still result in a stronger currency despite tourism exchanges at home.

[@jmfireboy]

AP tests tomarrow. One topic I needed review on. Thanks. Good luck everyone

[@namdzoannhat]

Mr Clifford, the exchange-rate effect says a lower price lv causes the real exchange rate to depreciate, but here when japan has higher inflation rate, which means higher price lv, its exchange rate depreciate while US' appreciate. Is there sth wrong? Also I think higher inflation rate leads to higher interest rate, so there should be the same result. But here answer in Q3 and Q4 are different. Can you explain it to me pls?

[@nikhilgoyal007]

I don't know what Iv means. Currencies real interest rate ( and not nominal ) determines their attractiveness. Real Interest rate = Nominal Interest - Inflation.Higher Inflation does not mean that interest rates will increase automatically. If the central bank wants to curb inflation they can raise nominal interest ( on the shorter duration ) , or if the market believes the economy is picking up then cost of credit hence the nominal rates will improve as well. but if the economy is not doing any better or the central bank does not think inflation is too much of a trouble then nominal rates will stay the same and inflation will keep increasing bringing real interest rates further down and causing the currency to depreciate. In Yen's case some of it is it's own doing and some is because of the dollar strength as well .

[@sportsvideos2787]

Wait I'm confused. surely if US has a huge recession the yen should appreciate and the usd should depreciate

[@gridcaster]

You can think of it a couple of ways: 1. The recession causes incomes to fall in the USA (this is what he describes in the video). If incomes in USA fall then Americans buy fewer goods (fewer domestic and fewer Japanese). Americans buying fewer Japanese goods causes the demand for Yen to decrease, which causes the depreciation of the Yen. All other things constant, if the Yen depreciates the Dollar must appreciate. 2. The recession causes price levels to fall (typical recession, AD falls --- like in the Great Depression when price levels fell. If this isn't intuitive look it up, you'll see that prices most definitely FELL during the Great Depression). If price levels in the USA fall then Japanese will be more likely to buy American goods...so, the Japanese will supply their Yen and demand dollars. Increasing the demand for dollars causes the dollar to appreciate and Yen to depreciate. Do **not** fall into the fallacy of thinking currency appreciating is good and depreciating is bad. This isn't true...but it leads many students to guess that a recession (which is "bad") must cause depreciation of the currency (which they think is "bad"). The two have nothing to do with one another.

[@sportsvideos2787]

@@gridcaster thank you very much for your detailed response which made me understand appreciation and deprecation more. For your second explanation I think you made a typo because the yen depreciates does it not? Thanks

[@hamdinuur9305]

Thank u it's really helpful fr me

[@shreyanshnigam3885]

Americans are very good in physical comedy like Ross geller and this man

[@PinguExpert]

Thanks so much! Makes sense now

[@jeanshawn]

hold up... if theres a recession in the US, wouldnt that also cause price level to go down or is that more long term?? (lower price level, more japanese can buy)

[@SirPerfectful]

Sean Moore An inflation is just when there's more supply of dollars than there should be for the demand. And he was taking it from US' perspective, not Japan's.

[@TheEsthefanie]

+Sean Moore well inflation also means an increase in prices since the supplier need to cover themselves. So yea i think that price levels lowering would be more of a long term response. And in terms, hopefully in the long run they wold be able to buy more of our stuff but if the recc. is really bad that wouldnt mean much to our econ.

[@yuyuweiwei117]

Hi Mr. Clifford, do you think you can upload some more videos before the ap macro test?? your videos have helped me a ton, and I've seen every single one of them :D

[@salemgheit2293]

Fabulous explanation

[@ahmedmasoud9027]

Great videos

[@macyr2382]

These are pretty helpful! Thanks!

[@Consequent_Enchroachment]

If we apply this concepts in terms of candlesticks which one is the supply and which one is the demand , the red one is the supply and the blue is the demand or both are representing each currency ? the red one is the USD and the blue is the JPY ? or the demand of each currency is represented by the wick and the offer is represented by the body of the candle ? would be graet if you could make a video explaining that ..

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What kind of shifter Q5 is?

[@syarifahmardhiah5103]

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[@danielcuevas3276]

thank you!

[@SunnyCaChua]

OMG THANK YOU SO MUCHHHH!!!

[@CARLOSFRANCO1000]

Video interesting...♫

[@intertipster682]

I don't get the point for the recession question. If US gets into recession investors are going out of USD. First because of uncertain economic outlook and secondly because FED is going to lower interest rates in case of recession. Can someone help?

[@yinhaoqian153]

could u make a video on bloopers!!!!PLEASE!!!

[@iteenie]

Hope that makes sense :D It took me 2 days to figure it out.

[@pengok1995]

Please make one on how appreciation/depreciation of the currency affect export and import!!!!!!!!!!!!!!

[@4ort666alpha]

Hi guys! How do we call the effect of a rise in the expected exchange rate to current exchange rate ?

[@JustinWhitemarketing]

Come teach at Carleton University in Canada please!

[@iteenie]

If the USD depreciates against another currency, it will be much cheaper to buy US goods and services -> US will export more. At the same time, the other currency, let's say CAD, becomes more expensive relative to the USD --> US will import less from CAN If the USD apreciates against another currency, its goods and services will become more expensive to foreigners -> US will export less ( nobody wants to import from US) At the same time, the CAD becomes less expensive -> US will import more

[@TheEpicGod111]

5 years later this comment actually helped so much

[@osamabeskales2187]

you are very funny :D

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Hello Mr. Hartmans class

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when you uploading 5.4 ? We pay in m1

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I love u

[@martenalires9527]

The answer for question 5 makes no sense. If Japan places a Tariff on U.S imports then we (the U.S) will demand less Yen thus, shifting the market demand curve for yen left. As a result, the U.S will supply less dollars. Therefore, the dollar appreciates and the Yen depreciates

[@mctoom]

True

[@awerawer0708]

Why would we demand less yen?

[@hungpham2803]

@@AnzorKhawaj I think it should've been the other way around. When Japan places a tariff on U.S imports, the Japanese will demand less U.S goods, therefore the demand for dollar will decrease. Isn't that what tariff is supposed to do ?

[@ahmedmasoud9027]

😂😂😂😂

[@nikhilgoyal007]

Thanks, love your videos and teaching style but three of these points are really not correct or conclusive - 2. US cuts taxes - That will have many effects - a) Net interest income after tax would increase making dollar more attractive hence higher demand and dollar appreciates b) economy gets a stimulus and with increased economic activity as a result, growth forecasts and interest rates expected to improve from a low growth and rate environment - this would be positive for the dollar and it would appreciate ( currently happening now in the wake of Trump proposed tax cuts, dollar index multi year highs ) c) if the tax cut causes inflation and it is not accompanied with growth and interest rate hikes then the real interest rate would decrease and dollar would depreciate. d) Since US is a net importer from Japan (and most other countries) even if they had more money to buy overseas assets that wouldn't be a very strong case to chase outbound assets in a net positive way hence USD depreciation from this point of view would be minimalist. Summarizing, decreasing tax cuts will make FX income net of taxes higher and economy more attractive and lead to appreciation of local currency. Similarly 5 and 6 have flawed arguments - If someone wants to know, let me know. Some of this also really changes with the characteristics of the individual countries. 6 the answer is right but not because of the reason mention.