0:00:00.673,0:00:02.076 In this and the next few videos 0:00:02.076,0:00:03.874 we're going to be[br]studying something called 0:00:03.874,0:00:06.333 "aggregate supply" and "aggregate demand." 0:00:06.333,0:00:07.405 Actually, we're going to start 0:00:07.405,0:00:08.207 with aggregate demand 0:00:08.207,0:00:10.739 and then start talking[br]about aggregate supply. 0:00:10.739,0:00:13.075 We're going to think[br]about aggregate demand 0:00:13.075,0:00:16.343 and aggregate, I'll rewrite the word, 0:00:16.343,0:00:19.618 aggregate supply. 0:00:19.618,0:00:20.810 What I really want to emphasize 0:00:20.810,0:00:22.403 in this video is in a lot of ways, 0:00:22.403,0:00:23.990 it's going to look similar to 0:00:23.990,0:00:25.078 traditional supply and demand, 0:00:25.078,0:00:26.621 but I want to emphasize that there's 0:00:26.621,0:00:28.207 a very big difference between 0:00:28.207,0:00:30.957 aggregate demand and traditional demand 0:00:30.957,0:00:33.207 in a microeconomic context. 0:00:33.207,0:00:34.959 Aggregate supply in a macroeconomic 0:00:34.959,0:00:38.469 context and just regular supply 0:00:38.469,0:00:40.468 in a microeconomic context. 0:00:40.468,0:00:41.606 To think about that, 0:00:41.606,0:00:43.803 let's go to the micro version. 0:00:43.803,0:00:46.142 These are macroeconomics 0:00:46.142,0:00:47.933 so we're looking at economy as a whole. 0:00:47.933,0:00:51.472 These are macro ideas. 0:00:51.472,0:00:52.455 To make that comparison, 0:00:52.455,0:00:54.124 let's revisit the micro-, 0:00:54.124,0:00:56.447 the microeconomics ideas of 0:00:56.447,0:00:57.199 supply and demand. 0:00:57.199,0:00:59.046 To do that, we can focus on 0:00:59.046,0:01:00.454 a particular market. 0:01:00.454,0:01:03.019 Maybe it's the market for candy bars, 0:01:03.019,0:01:05.834 so this is the market for candy bars. 0:01:05.834,0:01:07.813 We've seen this many, many, many times, 0:01:07.813,0:01:08.994 this is most of what we were doing 0:01:08.994,0:01:10.804 when we were studying microeconomics. 0:01:10.804,0:01:12.991 On the vertical axis, we would 0:01:12.991,0:01:14.860 plot the price per unit from 0:01:14.860,0:01:16.584 the candy bar and the horizontal axis 0:01:16.584,0:01:19.482 you would have the quantity bought or sold 0:01:19.482,0:01:22.286 in the given amount of time. 0:01:22.286,0:01:23.940 We saw that the demand curve 0:01:23.940,0:01:25.859 tended to be downward sloping, 0:01:25.859,0:01:27.949 it would look something like that. 0:01:27.949,0:01:30.067 There was multiple ways to interpret this. 0:01:30.067,0:01:32.806 One way to interpret this at a high price, 0:01:32.806,0:01:35.697 people would say, "Why should I buy this 0:01:35.697,0:01:36.794 candy bar? I could buy other things 0:01:36.794,0:01:38.531 with that money that would make me 0:01:38.531,0:01:39.863 just as happy or happier." 0:01:39.863,0:01:42.447 So they would purchase[br]a low quantity of it. 0:01:42.447,0:01:46.026 At a low price, this is a low price 0:01:46.026,0:01:47.023 right over here, people say, 0:01:47.023,0:01:48.325 "This is a pretty good deal. I can get 0:01:48.325,0:01:50.008 candy bars, they're so cheap, 0:01:50.008,0:01:51.280 I can buy a bunch of them. 0:01:51.280,0:01:52.610 Instead of buying other[br]things, instead of buying 0:01:52.610,0:01:55.523 lollipops and ice cream,[br]I'll buy candy bars," 0:01:55.523,0:01:57.530 then they'll buy a high quantity of it. 0:01:57.530,0:01:58.590 So that's one way to interpret it. 0:01:58.590,0:01:59.614 The other way to interpret it was 0:01:59.614,0:02:01.393 as essentially as a[br]marginal benefit curve. 0:02:01.393,0:02:03.867 That very first few units of candy bars 0:02:03.867,0:02:06.095 to get produced, there's someone there 0:02:06.095,0:02:08.114 who just loves candy bars so much 0:02:08.114,0:02:09.647 there's a high willingness to pay for it. 0:02:09.647,0:02:11.854 There's a high benefit[br]for those first few units. 0:02:11.854,0:02:13.719 As you have more and more units, 0:02:13.719,0:02:15.522 the incremental benefit to the market 0:02:15.522,0:02:16.609 gets less and less. 0:02:16.609,0:02:18.153 You can view as they are people who 0:02:18.153,0:02:20.446 still like candy bars, but not as much 0:02:20.446,0:02:22.658 as the people who bought[br]those first few units. 0:02:22.658,0:02:26.514 That is why you have a[br]downward sloping curve. 0:02:26.514,0:02:29.595 When we think about aggregate demand, 0:02:29.595,0:02:30.985 it's going to look very similar, 0:02:30.985,0:02:33.590 but the idea is a good bit different. 0:02:33.590,0:02:36.650 I'll do it in a different color 0:02:36.650,0:02:38.153 to show that it's different. 0:02:38.153,0:02:39.320 Now we're in the macro version. 0:02:39.320,0:02:42.067 We're talking about aggregate demand. 0:02:42.067,0:02:44.180 Aggregate demand. 0:02:44.180,0:02:45.665 The first thing to realize is we're 0:02:45.665,0:02:46.852 talking about aggregate demand. 0:02:46.852,0:02:47.733 We're going to be thinking about 0:02:47.733,0:02:48.612 the economy as a whole. 0:02:48.612,0:02:49.717 We're not just thinking about 0:02:49.717,0:02:52.191 the market for just one good or service. 0:02:52.191,0:02:54.936 In aggregate demand, what we do is 0:02:54.936,0:02:57.448 we plot on the horizontal[br]axis, not quantity, 0:02:57.448,0:02:59.219 not just the quantity bought or sold 0:02:59.219,0:03:01.022 of one good or service[br]in an amount of time, 0:03:01.022,0:03:04.010 we plot the actual production of 0:03:04.010,0:03:06.150 the economy in a given period of time. 0:03:06.150,0:03:07.731 We've already studied that. 0:03:07.731,0:03:09.356 The actual production of the economy 0:03:09.356,0:03:12.205 in a given period of time is real GDP. 0:03:12.205,0:03:16.252 We plot, on this axis, real GDP, 0:03:16.252,0:03:17.998 so it's really how much are we producing? 0:03:17.998,0:03:19.669 I guess there is an analogy to quantity, 0:03:19.669,0:03:21.010 it's kind of the quantity of the 0:03:21.010,0:03:23.124 productivity of the economy. 0:03:23.124,0:03:25.122 In this axis right over here, 0:03:25.122,0:03:26.921 we plot price level. 0:03:26.921,0:03:28.854 This is prices. 0:03:28.854,0:03:33.004 This isn't prices for one good or service, 0:03:33.004,0:03:34.455 this isn't just a price for candy bars, 0:03:34.455,0:03:37.856 this is the general level of prices 0:03:37.856,0:03:39.600 in the economy. 0:03:39.600,0:03:41.060 Maybe you're saying[br]it's a weighted average 0:03:41.060,0:03:41.982 or however you want to measure it, 0:03:41.982,0:03:44.289 some way of measuring the level 0:03:44.289,0:03:45.690 of prices and economy. 0:03:45.690,0:03:47.250 What we will see is this is a 0:03:47.250,0:03:49.260 downward sloping curve. 0:03:49.260,0:03:51.120 It does look like this. 0:03:51.120,0:03:53.984 It will look something like this or 0:03:53.984,0:03:56.927 we can assume, we actually don't know 0:03:56.927,0:03:58.051 whether it definitely looks like that, 0:03:58.051,0:04:00.220 but economists will tell[br]you it looks like that 0:04:00.220,0:04:02.262 based on certain theories. 0:04:02.262,0:04:03.191 They like it this way because 0:04:03.191,0:04:04.134 it starts to explain, 0:04:04.134,0:04:05.520 based on their models, 0:04:05.520,0:04:06.682 and you can kind of separate out 0:04:06.682,0:04:08.461 the emotional aspects of economics, 0:04:08.461,0:04:10.856 it is one way of potentially 0:04:10.856,0:04:12.475 explaining economic cycles, 0:04:12.475,0:04:13.866 although if you know from the last video 0:04:13.866,0:04:16.356 I'm actually a stronger believer in 0:04:16.356,0:04:17.853 the emotional aspects of it. 0:04:17.853,0:04:19.686 But it will be downward sloping. 0:04:19.686,0:04:23.719 It will be downward sloping like this. 0:04:23.719,0:04:25.583 Once again, this is one product, 0:04:25.583,0:04:27.118 goods or service right over here. 0:04:27.118,0:04:28.856 This is the economy as a whole. 0:04:28.856,0:04:30.456 This is just a general level of prices. 0:04:30.456,0:04:33.788 This is the actual[br]productivity of the economy. 0:04:33.788,0:04:36.008 This is saying, and it's[br]a little unintuitive 0:04:36.008,0:04:39.960 at first, that if prices are high, 0:04:39.960,0:04:41.787 it's seldom this extreme, it's not like 0:04:41.787,0:04:43.285 the GDP would go to zero, 0:04:43.285,0:04:45.544 but we'll just assume it's simplified 0:04:45.544,0:04:46.730 like this ... Maybe I'll draw it with 0:04:46.730,0:04:47.719 something like this ... 0:04:47.719,0:04:49.386 Maybe I'll have it something like, 0:04:49.386,0:04:51.226 maybe draw it something like that 0:04:51.226,0:04:52.465 so I don't have to make the extreme 0:04:52.465,0:04:53.895 statement that if prices[br]are at some level, 0:04:53.895,0:04:55.501 that there will be no GDP. 0:04:55.501,0:04:57.720 Generally saying if prices are high, 0:04:57.720,0:05:00.927 GDP will contract and remember, 0:05:00.927,0:05:04.246 ceteris paribus, all other things equal, 0:05:04.246,0:05:07.986 if prices are low, GDP will expand. 0:05:07.986,0:05:09.542 It's happening for completely different 0:05:09.542,0:05:11.674 reasons than this downward sloping. 0:05:11.674,0:05:13.124 This downward sloping is essentially 0:05:13.124,0:05:14.070 a substitution effect. 0:05:14.070,0:05:16.205 When prices are high, people say, 0:05:16.205,0:05:17.462 "I don't need to buy candy bars. 0:05:17.462,0:05:19.130 I can go buy ice cream or Slurpees 0:05:19.130,0:05:20.589 or Slushees or something else 0:05:20.589,0:05:22.475 that makes me happy," or 0:05:22.475,0:05:24.429 and when prices are low, they say, 0:05:24.429,0:05:25.661 "Let me substitute candy bars for 0:05:25.661,0:05:26.934 other things because I'm getting a good 0:05:26.934,0:05:29.131 deal on candy bars." 0:05:29.131,0:05:31.248 Over here that is not what is happening. 0:05:31.248,0:05:32.939 What's happening here,[br]and there's a couple 0:05:32.939,0:05:36.411 of theories why economists will justify 0:05:36.411,0:05:39.423 a downward sloping aggregate demand curve, 0:05:39.423,0:05:46.224 let me make this clear,[br]this is aggregate demand. 0:05:46.224,0:05:47.469 This is essentially saying[br]how much productivity 0:05:47.469,0:05:49.754 there will be in the economy as a function 0:05:49.754,0:05:52.135 of price levels in the economy. 0:05:52.135,0:05:54.073 This is aggregate demand ... 0:05:54.073,0:05:56.382 And this is just demand right over here. 0:05:56.382,0:05:58.804 There's three major theories why 0:05:58.804,0:06:01.149 economists believe that[br]there is a downward 0:06:01.149,0:06:03.910 sloping aggregate demand curve. 0:06:03.910,0:06:06.651 The first is called the "wealth effect." 0:06:06.651,0:06:08.022 Let me write these down. 0:06:08.022,0:06:12.065 The first is called the "wealth effect." 0:06:16.219,0:06:18.535 The wealth effect is just saying, 0:06:18.535,0:06:20.800 and once again, it's[br]a little nonintuitive, 0:06:20.800,0:06:22.899 because in my mind when I start saying 0:06:22.899,0:06:26.005 prices have gone down, I start saying, 0:06:26.005,0:06:27.293 "Prices have gone down, 0:06:27.293,0:06:28.934 wages have gone down, maybe 0:06:28.934,0:06:30.262 profits have gone down, and then 0:06:30.262,0:06:32.069 people will get less optimistic, 0:06:32.069,0:06:33.727 the economy will shrink." 0:06:33.727,0:06:35.523 That's not what we're saying 0:06:35.523,0:06:36.734 in this chart right over here. 0:06:36.734,0:06:38.075 Remember, ceteris paribus ... 0:06:38.075,0:06:40.075 All other things equal. 0:06:40.075,0:06:41.931 We're assuming over here only, 0:06:41.931,0:06:44.128 so if we take this[br]scenario right over here, 0:06:44.128,0:06:47.284 we're assuming only prices have gone down. 0:06:47.284,0:06:49.607 Everything else in the economy is equal. 0:06:49.607,0:06:51.338 Employment has not changed. 0:06:51.338,0:06:52.998 Profits have not changed. 0:06:52.998,0:06:56.239 People's optimism has not changed. 0:06:56.239,0:06:58.261 The only thing that changes is 0:06:58.261,0:07:00.268 people wake up one day and everything 0:07:00.268,0:07:02.162 in the economy is half the price 0:07:02.162,0:07:03.669 it was before. 0:07:03.669,0:07:04.743 People have the same savings. 0:07:04.743,0:07:06.267 They have the same amount of money 0:07:06.267,0:07:07.153 in their wallet. 0:07:07.153,0:07:09.407 If that happens, all things equal, 0:07:09.407,0:07:10.823 now they say, "With the same amount of 0:07:10.823,0:07:12.195 money that I have in my wallet, 0:07:12.195,0:07:15.626 I can now buy more. I feel wealthier." 0:07:15.626,0:07:16.996 That's the wealth effect. 0:07:16.996,0:07:19.059 They will say, "I will go and demand more 0:07:19.059,0:07:22.160 goods and services[br]because with what I have 0:07:22.160,0:07:25.465 in my pocket, I can go buy more things." 0:07:25.465,0:07:28.235 Likewise, if for whatever reason people 0:07:28.235,0:07:28.989 woke up the next morning ... 0:07:28.989,0:07:32.301 Remember, all other things equal, 0:07:32.301,0:07:34.256 if the price of everything were to double, 0:07:34.256,0:07:35.496 they say, "Oh my God! I can't buy anything 0:07:35.496,0:07:37.191 anymore. Everything's too expensive. 0:07:37.191,0:07:38.408 I have to buy less of it. I'm going to 0:07:38.408,0:07:41.105 demand fewer goods and service." 0:07:41.105,0:07:42.272 The wealth effect is one theory 0:07:42.272,0:07:45.715 that would explain,[br]all other things equal, 0:07:45.715,0:07:47.417 why you would have a downward sloping 0:07:47.417,0:07:50.873 aggregate demand curve. 0:07:50.873,0:07:52.940 The other one is related[br]to interest rates. 0:07:55.154,0:08:00.297 I would call it savings[br]and interest rate effect. 0:08:00.297,0:08:05.466 Interest rate effect. 0:08:05.466,0:08:08.526 You can imagine, if before this bar 0:08:08.526,0:08:11.129 represented the total amount of money 0:08:11.129,0:08:12.399 someone had in their pockets, 0:08:12.399,0:08:14.698 and this is how much they needed to spend 0:08:14.698,0:08:16.857 on goods and services in order to have 0:08:16.857,0:08:18.697 a nice, happy, productive life, 0:08:18.697,0:08:20.660 this is originally what they were 0:08:20.660,0:08:22.188 going to save, now all of a sudden, 0:08:22.188,0:08:22.893 now if all of a sudden if things get 0:08:22.909,0:08:25.458 a lot cheaper, they don't have to 0:08:25.458,0:08:27.276 spend this much on goods and services. 0:08:27.276,0:08:28.235 They could spend less 0:08:28.235,0:08:29.165 on goods and services. 0:08:29.165,0:08:30.914 Maybe if things got a lot cheaper, 0:08:30.914,0:08:32.630 they could spend less[br]on goods and services. 0:08:32.630,0:08:34.865 Now they could spend maybe this amount 0:08:34.865,0:08:36.013 on goods and services, 0:08:36.013,0:08:37.817 and they could save much more. 0:08:37.817,0:08:41.335 Right over here ... Remember, 0:08:41.335,0:08:42.576 all other things equal, 0:08:42.576,0:08:43.743 if everyone woke up tomorrow 0:08:43.743,0:08:45.163 and things were just half priced, 0:08:45.163,0:08:46.936 people would be able to spend less 0:08:46.936,0:08:48.272 on the things they need, 0:08:48.272,0:08:50.835 and they would be able[br]to save a lot more money. 0:08:50.835,0:08:53.210 We've seen before, savings, 0:08:53.210,0:08:55.104 when people save money, it just goes into 0:08:55.104,0:08:56.417 the financial system. 0:08:56.417,0:08:57.495 You save it, you put it into the bank, 0:08:57.495,0:08:59.606 and it just gets lent out to other people. 0:08:59.606,0:09:02.278 So when you have increase in savings, 0:09:02.278,0:09:05.277 all other things equal, 0:09:05.277,0:09:06.410 when prices goes down, 0:09:06.410,0:09:08.292 all other things equal, 0:09:08.292,0:09:10.605 then savings go up which means 0:09:10.605,0:09:13.914 that the supply of money to be lent, 0:09:13.914,0:09:17.749 supply of lenders or money to be lent, 0:09:17.749,0:09:22.029 money lending goes up. 0:09:22.029,0:09:23.611 We saw that in a previous video. 0:09:23.611,0:09:24.802 If you increase the supply of money 0:09:24.802,0:09:25.918 that can be lent, the price of 0:09:25.918,0:09:28.003 borrowing the money will go down. 0:09:28.003,0:09:29.430 Another way to think about it, 0:09:29.430,0:09:30.615 interest rates. 0:09:30.615,0:09:32.745 Interest rates will go down. 0:09:32.745,0:09:34.500 When interest rates go down, 0:09:34.500,0:09:35.631 it becomes cheaper, 0:09:35.631,0:09:36.623 you have to spend less interest 0:09:36.623,0:09:39.340 to borrow money and make investments. 0:09:39.340,0:09:41.336 Borrow money, build a house. 0:09:41.336,0:09:42.827 Borrow money, build a factory. 0:09:42.827,0:09:45.749 Borrow money, do whatever[br]... buy inventory. 0:09:45.749,0:09:47.611 Interest rates go down, 0:09:47.611,0:09:50.606 that stimulates investment, 0:09:50.606,0:09:53.810 that stimulates investment, 0:09:53.810,0:09:54.672 which once again, would cause 0:09:54.672,0:09:57.916 the economy to expand. 0:09:57.916,0:09:59.473 You would have more goods and services 0:09:59.473,0:10:00.907 being produced. 0:10:00.907,0:10:02.356 Likewise, if you went the other way, 0:10:02.356,0:10:03.610 if prices went up, 0:10:03.610,0:10:07.233 this is a situation[br]where prices went down. 0:10:07.233,0:10:09.989 if prices went up, now all of a sudden, 0:10:09.989,0:10:11.622 people have to spend more of their money. 0:10:11.622,0:10:14.885 More of their money on the things 0:10:14.885,0:10:16.289 that they maybe think that they need 0:10:16.289,0:10:18.014 to survive and be happy. 0:10:18.014,0:10:19.604 There will be less savings. 0:10:19.604,0:10:20.856 If there's less savings, 0:10:20.856,0:10:23.365 there's less money to be lent. 0:10:23.365,0:10:25.618 There will be higher interest rates 0:10:25.618,0:10:26.939 and there will be less investment, 0:10:26.939,0:10:29.006 so the economy will contract. 0:10:29.006,0:10:31.894 So real GDP ... And remember, 0:10:31.894,0:10:34.410 when I say GDP here, maybe[br]I'll call it real GDP, 0:10:34.410,0:10:36.740 real GDP would go down. 0:10:36.740,0:10:42.202 This is real GDP would go up. 0:10:42.202,0:10:43.686 The third theory of why ... 0:10:43.686,0:10:44.995 or the third justification because 0:10:44.995,0:10:47.509 economists like to have this downward 0:10:47.509,0:10:48.789 sloping curve so that they can justify, 0:10:48.789,0:10:51.730 and we'll see how aggregate supply 0:10:51.730,0:10:53.519 and demand can cause business cycles, 0:10:53.519,0:10:54.855 the third effect is essentially, 0:10:54.855,0:10:56.270 I'll call it a foreign exchange effect. 0:10:56.270,0:10:59.808 A foreign exchange effect. 0:10:59.808,0:11:04.717 Foreign exchange. 0:11:04.717,0:11:06.122 Based on the line of reasoning, 0:11:06.122,0:11:07.872 so let's say a situation once again where 0:11:07.872,0:11:09.133 prices went down, 0:11:09.133,0:11:10.596 based on their line of reasoning and 0:11:10.596,0:11:12.536 justification, we said if prices go down, 0:11:12.536,0:11:16.870 then interest rates go down because 0:11:16.870,0:11:18.465 there's more money to be lent 0:11:18.465,0:11:20.399 in that economy in that currency. 0:11:20.399,0:11:22.337 If interest rates go down, 0:11:22.337,0:11:23.710 investors might say, 0:11:23.710,0:11:25.731 "I only get low interest in my country. 0:11:25.731,0:11:29.305 Why don't I convert my money into 0:11:29.305,0:11:30.581 other currencies where I can get 0:11:30.581,0:11:31.938 higher interest rates?" 0:11:31.938,0:11:33.688 So if interest rates go down, 0:11:33.688,0:11:35.457 people convert out of the currency. 0:11:35.457,0:11:40.524 Convert out of the currency. 0:11:40.524,0:11:42.190 So maybe before, if we're talking about 0:11:42.190,0:11:44.159 America and maybe the interest rates 0:11:44.159,0:11:46.334 are really low in the[br]US and interest rates 0:11:46.334,0:11:48.450 are higher in the UK, maybe because 0:11:48.450,0:11:51.183 prices didn't go down there as much, 0:11:51.183,0:11:52.529 people say, "I'm going to convert my money 0:11:52.529,0:11:55.120 from dollars to pound sterling." 0:11:55.120,0:11:56.913 When they do that, they will essentially, 0:11:56.913,0:11:58.827 because once again, if people are 0:11:58.827,0:12:01.930 converting from ... I've gone in-depth 0:12:01.930,0:12:03.411 on some of the videos on foreign exchange, 0:12:03.411,0:12:05.274 if people are converting from dollars 0:12:05.274,0:12:07.741 to pounds, that means that there's 0:12:07.741,0:12:10.428 a larger supply of dollars and 0:12:10.428,0:12:11.746 more demand for pounds. 0:12:11.746,0:12:13.744 The price of the dollar relative to 0:12:13.744,0:12:15.165 the pound will go down. 0:12:15.165,0:12:16.737 Essentially, the dollar will weaken. 0:12:16.737,0:12:22.416 The dollar will weaken[br]relative to other currencies. 0:12:22.416,0:12:24.329 If the dollar weakens relative to 0:12:24.329,0:12:24.948 the other currency, 0:12:24.948,0:12:26.001 this is a little confusing, 0:12:26.001,0:12:27.662 I go into more depth into this when 0:12:27.662,0:12:29.384 I talk about currency exchange, 0:12:29.384,0:12:31.000 if the dollar weakens relative to 0:12:31.000,0:12:32.715 other currencies, then American 0:12:32.715,0:12:34.731 goods and services are going to appear 0:12:34.731,0:12:37.635 to be cheaper to people in England. 0:12:37.635,0:12:42.154 For example, if I offer to make a car 0:12:42.154,0:12:44.011 in America for $10,000, 0:12:44.011,0:12:49.683 maybe $10,000 before all of this happened, 0:12:49.683,0:12:51.452 translates into 5,000 pounds, 0:12:51.452,0:12:53.174 but now the dollar has weakened. 0:12:53.174,0:12:56.135 Now $10,000 is going to translate into 0:12:56.135,0:12:58.021 4,000 pounds. 0:12:58.021,0:12:59.485 Foreign consumers will say, 0:12:59.485,0:13:01.862 "Wow, American cars just got cheaper 0:13:01.862,0:13:03.606 when we view it in our own currency." 0:13:03.606,0:13:05.080 More and more of them are going to want 0:13:05.080,0:13:06.785 to buy American things so America will 0:13:06.785,0:13:08.536 export more. 0:13:08.536,0:13:10.006 Once again, if there's more demand 0:13:10.006,0:13:11.362 for American goods and services, 0:13:11.362,0:13:13.211 the GDP will expand. 0:13:13.211,0:13:16.185 This is related to low interest rates 0:13:16.185,0:13:18.078 driving people to take currency out 0:13:18.078,0:13:20.943 or exchange out of the currency we're 0:13:20.943,0:13:22.535 talking about, which will make that 0:13:22.535,0:13:23.530 currency cheaper, which will make 0:13:23.530,0:13:24.660 its goods and services cheaper to 0:13:24.660,0:13:25.922 the rest of the world, 0:13:25.922,0:13:27.315 which it will essentially 0:13:27.315,0:13:31.588 once again, make net exports increase. 0:13:31.588,0:13:32.882 You really could just cut to the chase 0:13:32.882,0:13:34.914 and say if the price level all of a sudden 0:13:34.914,0:13:36.311 in US dollars just got cheaper, 0:13:36.311,0:13:38.447 people say there's deals to be had 0:13:38.447,0:13:40.314 in the US, and once again, 0:13:40.314,0:13:42.318 net exports would increase. 0:13:42.318,0:13:43.922 Once again, when you have low price level, 0:13:43.922,0:13:47.644 you could have GDP expanding. 0:13:47.644,0:13:48.979 Obviously if the prices were to increase, 0:13:48.979,0:13:52.066 the opposite dynamic might occur.