Macro 6.2 & 6.3 Foreign Exchange Markets and Exchange Rates

This video covers topic 6.2 and 6.3 of the AP Macroeconomics Course Exam Description (CED). This video is all about the exchange rates and foreign exchange markets. It goes over all the reasons for changing exchange rates and has examples of how shifts in currency supply and demand impact exchange rates.
To read more about this topic, head to this link: www.reviewecon.com/foreign-ex...
To get more practice with the skills needed to ace these exams, head to ReviewEcon.com where there are lots of games and activities to help you practice.
www.reviewecon.com/games-acti...
To support this channel, like and subscribe, then purchase the Total Review Booklet from ReviewEcon.com: www.reviewecon.com/total-revi...
Follow me on twitter: / apeconguy
or
Follow me on facebook: / reviewecon
Note: AP©, Advaanced Placement Program©, and College Board© are registered trademarks of the College Board, which was not involved in the production of, and does not endorse, this material.
I would like to acknowlege the work of Dick Brunelle and Steven Reff from Reffonomics.com who’s work inspired many of the review games on ReviewEcon.com. I would also like to thank Francis McMann, James Chasey, and Steven Reff who taught me how to be an effective AP Economics teacher at AP summer institutes; as well as the countless high school teachers, and college professors from the AP readings, economics facebook groups, and #econtwitter.

[@shizebtw7082]

Underrated channel, deserves a million subs. This guy explains so clearly and slowly and makes everything seem easy. Thank you so much.

[@ReviewEcon]

You're too kind! The subs are coming slowly. Some day! You're very welcome! Good luck with your studies!

[@victoriali5178]

I cannot believe there is only 6 comments! He's explanation is awesome.

[@ReviewEcon]

Thank you! Good luck on your exams!!

[@heyitsmaddie2332]

I don't know what I'd do without your videos tbh; They’ve been one of the sole reasons I've been able to keep a high A in my AP Macro class. Thank you for making Economics so much easier to understand!

[@ReviewEcon]

You're very welcome! I wish you the very best of luck with this year's exams!

[@aventurineenjoyer]

youre singlehandedly getting me through ap econ, man legit, my unit 5 and 6 test is tomorrow and im binge watching youre macro unit 5 and 6 videos at 12am

[@ReviewEcon]

Good luck on your test! You got this!

[@aventurineenjoyer]

@@ReviewEcon thank you!

[@jaycpawl2133]

your explanation is super easy to understand! i missed this day of class and have a test tmr. thanks a bunches!

[@ReviewEcon]

You're very welcome! Good luck on that test!

[@Charlayo]

beautiful tysm

[@user-fu2dh5rr3h]

Just awesome Than you 😊

[@ReviewEcon]

You're very welcome! Good luck on your exams!

[@FitFlicks-ph7cs]

TYSMMM

[@ReviewEcon]

You're very welcome!

[@amyliu7745]

Would price level as a shifter shift both the supply and demand curves then?

[@ReviewEcon]

Yes, but you only need to shift one curve on the AP exam. They will accept either shift, or will tell you which curve to shift.

[@glennwatson3313]

Its funny that you use the metaphor of a box in the middle of the ocean because I use a similar metaphor but I say there is a top secret island in the middle of the Pacific Ocean where currencies are exchanged.

[@ReviewEcon]

That's perfect! It keeps kids from thinking we're talking about the supply and demand of money or the domestic value of money.

[@Thisisyhere]

Omg, seven hours ago, how do you know I am going to have a test on this tomorrow

[@Thisisyhere]

Question! Shouldn't it be the supply of dollars shift to the right since there is inflation in the US, and people want to by more foreign products because they look cheaper? And also in this situation, the demand for dollar should be decrease, because there is inflation and US product price level will increase, so foreigner will demand less?

[@ReviewEcon]

Yes, if we have a higher price level (inflation) the supply of dollars will increase and the demand for dollars will decrease. I discuss that example at 10:52.

[@ReviewEcon]

Good luck on your test tomorrow!!

[@amyliu7745]

What is the label for the y axis? Why is it price?

[@ReviewEcon]

It's not just Price. It is the exchange rate, or the price of one currency in terms of another currency. When people buy currency, the price is the other currency. There are several other acceptable ways to label the Y axis. Use what your professor or teacher prefers.

[@amyliu7745]

@@ReviewEcon Ohh okay. If I labeled it as "e", would that be acceptable to Collegeboard?

[@ReviewEcon]

My understanding is that is not enough. They want both currencies on the y axis. Comparison currency/market currency is the standard. So if it is the market for US dollars being compared to Japanese Yen, ¥/$ would be the label.

[@amyliu7745]

@@ReviewEcon Oh sorry I should have clarified. Like my label for the y axis would still be pesos per $, but like I would say for each point, e1 and e2?

[@ReviewEcon]

Oh! Gotcha, yes e is acceptable. 😄