Principles of Macroeconomics / Unit 13 MAC 1212 short lesson, about 20 seconds
Relative Inflation
Captions available
The idea
Over a medium horizon, a country with higher inflation than its trading partners sees its currency depreciate, because each unit buys less at home and so is worth less abroad.
In practice
Inflation erodes buying power, and the exchange rate eventually reflects that.
Where people slip
This works slowly, over years rather than the minutes expectations take.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
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