Mr. Clifford introduces the foreign exchange market, a key concept for the AP macro exam. He explains the dynamics of currency demand and supply, focusing on the roles of Americans and Europeans in the market. The video covers the effects of currency appreciation and depreciation, emphasizing that these are not inherently good or bad. Various scenarios are presented to illustrate how factors like travel, income changes, inflation, and interest rates impact currency value. The video aims to simplify understanding of these concepts for students.

How does inflation in the United States affect the demand for dollars?

What is the impact of higher relative interest rates in the United States compared to Europe on the dollar?