Kurs Riil Dan Nominal (Nominal and Real Exchange Rate)

Summary

In this video, the presenter explores the concepts of nominal and real exchange rates in macroeconomics. The nominal exchange rate determines how much one currency is worth compared to another, while the real exchange rate adjusts for price differences between countries. Through examples of currency appreciation and depreciation, as well as the cost of goods like burgers in different countries, the video explains how these exchange rates affect purchasing power and economic conditions. The presenter also hints at a future discussion on Purchasing Power Parity (PPP), expanding on these concepts further.

Takeaways

• 😀 Nominal exchange rates represent the value used to exchange currencies between countries.
• 😀 The nominal exchange rate fluctuates and can either appreciate or depreciate.
• 😀 Appreciation of a currency means its value increases relative to another currency.
• 😀 Depreciation of a currency means its value decreases relative to another currency.
• 😀 Example: If 1 US Dollar used to equal 15,000 Rupiah and now equals 17,000 Rupiah, the US Dollar has appreciated, and the Rupiah has depreciated.
• 😀 Real exchange rates compare the prices of goods and services between countries, adjusting for the exchange rate.
• 😀 The real exchange rate helps understand the purchasing power of one country relative to another.
• 😀 Example: A burger in New York costs $2, while in Tokyo, it costs 1100 Yen. Converting to dollars, the Tokyo burger costs $10.
• 😀 If the real exchange rate changes and goods become more expensive in one country, it signals appreciation of that country's currency.
• 😀 Conversely, if goods become cheaper in one country, it signals depreciation of that country's currency.
• 😀 The difference between nominal and real exchange rates is that nominal focuses on currency trading, while real focuses on the cost of goods and services between countries.

Q & A

What is the difference between nominal exchange rates and real exchange rates?

Nominal exchange rates refer to the value of one currency in terms of another, used for currency exchange. Real exchange rates, on the other hand, are used to compare the cost of goods and services between countries, adjusting for currency values.

How are nominal exchange rates determined?

Nominal exchange rates are determined by the market value of a currency in relation to another currency. For example, if 1 US dollar equals 15,000 Indonesian Rupiah, that’s the nominal exchange rate.

What does currency appreciation mean?

Currency appreciation refers to an increase in the value of one currency relative to another. This means you can exchange the appreciating currency for more of the other currency.

What happens during currency depreciation?

Currency depreciation is when the value of a currency decreases relative to another currency, meaning more of the depreciating currency is needed to exchange for the other currency.

Can you give an example of currency appreciation?

If 1 US dollar was previously worth 15,000 Indonesian Rupiah and then increases to 17,000 Rupiah, the US dollar has appreciated, and the Rupiah has depreciated.

How is the real exchange rate calculated using the example of a burger in New York and Tokyo?

If a burger costs $2 in New York and 1,100 Yen in Tokyo, you divide the Yen price by the exchange rate (1 USD = 110 Yen) to find the equivalent price in dollars. In this case, 1,100 Yen divided by 110 gives $10, making the real exchange rate 0.2 Tokyo burgers per 1 New York burger.

What does it mean when the real exchange rate changes from 0.2 Tokyo burgers to 0.1 Tokyo burgers?

A change from 0.2 Tokyo burgers to 0.1 indicates that the cost of goods in Tokyo has become more expensive relative to New York, meaning the Yen has appreciated and the US dollar has depreciated.

What would it mean if the real exchange rate changed from 0.2 Tokyo burgers to 0.5 Tokyo burgers?

This change would indicate that the cost of goods in Tokyo has become cheaper relative to New York, meaning the Yen has depreciated and the US dollar has appreciated.

How do nominal and real exchange rates affect each other?

Nominal exchange rates directly affect real exchange rates because changes in currency values influence the cost of goods and services in different countries. For example, if the nominal value of the Yen decreases, the real exchange rate may reflect a lower cost of goods in Japan compared to other countries.

Why is understanding both nominal and real exchange rates important?

Understanding both is important for analyzing how currency values affect trade and the cost of living between countries. Nominal exchange rates help with currency conversion, while real exchange rates provide a clearer picture of how much you can actually purchase in different countries.