Added: 11 months ago
From: damienwking
Views: 4,537
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  • tks

    

  • This is one of the best videos I have seen! I understand so much more now!

  • Good video, cleary explaned

  • Finally - couldn't work out why inflation (local price rise and I always thought a bad thing) could make a currency appreciate... now I do.

  • Causes of Real Appreciation -- strengthening of local products value.

    -Decrease in Nominal Exchange Rate => less local dollars needed to buy one foreign currency unit

    -Decrease in foreign price level => decrease in nominal exchange rate.

    -Increase in local price level => less products required to fulfill exchange

    Causes of Real Depreciation -- weakening of local product value

    The converse is also true.

  • Something I noticed. Price levels may change internally (local monetary activity) or rather as a result of nominal appreciation or depreciation(external monetary activity).

    Example:

    internal chip price increase = less chips per beer

    external chip price increase due to nominal depreciation = more chips per beer.

  • I think this system revolves around nominal exchange rate. Now, increase in nominal exchange rate implies that more local currency units will be required to attain one foreign currency unit. Contrast is also true. Furthermore, increase in foreign price level implies a depreciation of nominal exchange rate (more local to foreign 1 currency) which implies that more local currency is needed for the new raised local currency amount (higher local cost level) which implies more local products for us.

  • mawd. 1000 thanks/.

  • Excellent! thank you

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