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At 17:24, it’s mentioned that the quantity (X-M) will decrease as Income increases. How can this be reconciled with the fact that Income equals C+G+I+(X-M), where it appears that all else equal, if Income increases, then X-M should tend larger?
More income leads to having more imports. So, in X-M, M value becomes bigger thereby bringing (X-M)'s value smaller. Hope that helps. And it is GDP value you're mentioning there, C+G+I+(X-M), not income.
Why at 19:55 do we think about how the quantity S-I is impacted by a different interest rate, but we do not think about how (G-T) + (X-M) curve would change under a different interest rate?
Hi sir, In practice problem 2 of this video when net exports go up (which basically means exports>imports) so the economy will have more cash in hand so logically cash outflows should decrease as cash inflow from exports is higher than cash outflow from imports.
The net exports of a country are the value of its exports minus the value of its imports. Net capital outflow refers to the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners. Net exports are equal to net capital outflow by an accounting identity, because exports from one country to another are matched by payments of some asset from the second country to the first. In other words, when exports are greater than imports (trade surplus), it indicates that a country is a net lender to the rest of the world. IFT Support Team
Hi, In practice question No.2 You have mentioned that when Savings goes up (Which is part of the Aggregate income) Net exports go up, and automatically the net capital outflow. Later on, when explaining the relationship between Investment spending and aggregate income, when explaining the graph you have said that there is a NEGATIVE relationship between Net exports and income increase? you have specifically said that imports are going to be higher? How come? Thank you in advance
An increase in savings means higher supply of dollars available to be invested abroad. The increased supply of dollars causes the equilibrium real exchange rate to fall. Because the dollar becomes less valuable, domestic goods become less expensive relative to foreign goods, so exports rise and imports fall. This means net exports increase. Higher domestic income leads to a higher domestic demand for all goods, both domestic and foreign. So a higher domestic income leads to higher imports, which implies decrease in net exports. IFT Support Team
@@IFT-CFA But you also said that the increase in income causes an increase in savings. So if increase in income increases imports, but also increase in income increases savings, and so increases exports... How should i think about it? or does one have a bigger effect than the other.
Sir, I have a very specific question and I hope you will help us answering the question. 1. I have practiced all the CFA L1 problems of IFT (All topic Q-Bank and answers). Both the books. 2. I have also solved all the problems of CFA Institute study material (Chapter end Question Answers) Will this be enough for the preparation? At this point I really don't want to practice more new questions rather would like to revise the solved one again. Please provide your valuable insights.
We suggest that you should prepare with the High-Yield Course. The High-Yield Course can be used on a ‘stand-alone’ basis if you are time-constrained. However, if you do have time, we recommend taking the High-Yield Course along with IFT’s regular material. This will help ensure sufficient mastery of the entire curriculum. Many candidates complain that they forget material covered earlier. The High-Yield Course addresses this problem by helping you to quickly revise key concepts. HY course includes: IFT High-Yield Notes® summarize the most important concepts from each reading in 2 to 5 pages. Key formulas and facts are presented in blue boxes while examples appear in gray boxes. IFT High-Yield Lectures® are online video lectures based on the notes. Each reading is covered in 10 to 20 minutes (total duration approx 15 hours) High-Yield Q-Bank® has between 600 and 700 questions covering concepts which are most likely to show up on the exam. These are online with automatic grading, but you can also export them into a PDF format. All Learning outcome are covered and minimum overlap of the questions. Key Facts and Formula Sheet: 10 pages covering key facts and formulas for all of Level I! BONUS: You will get the IFT Mobile App FREE You can purchase the HY course from this link: ift.world/product/high-yield-l1/ IFT support team
Hello, can you please provide thetopic Q-bank ? i dont have anything other than the chapter-end questions and i feel they re not enough thank you so much
Sir in 11.29 timeline in practice question , how capital flow will increase ? As you said that net export is increasing so it will earn money ? How out capital outflow please reply??
around 19.15 sec. it said that when interest rate comes down the 2nd point is achieved at lower level of income... but i feel it shall be at higher level of income
In Q2 When we have savings going up ,given constant investments,shouldn't the net exports decrease ? -When savings are up and investments are constant ,people will have more money to consume stuff and hence the imports would increase and net exports remain almost the same right? as for exports the investments are given constant so exports are not inc and imports are increasing so shouldn't net exports factor reduce due to rise in imports??
If savings are up, these savings will go abroad to finance investment in other countries. This will give a negative balance on the capital account, and enable a current account surplus. Opposite is true when savings are low. IFT Support Team
Active learning is proven to increase understanding and retention by 3 times! To master the Level I Curriculum in 3 simple steps - visit: ift.world/active-learning/
IS curve difficult to understand
This totally helped me understand this topic. I had been looking at the cfa coursework for hours and could not make a connection. Thank you
Glad it helped!
IFT Support Team
At 17:24, it’s mentioned that the quantity (X-M) will decrease as Income increases. How can this be reconciled with the fact that Income equals C+G+I+(X-M), where it appears that all else equal, if Income increases, then X-M should tend larger?
More income leads to having more imports. So, in X-M, M value becomes bigger thereby bringing (X-M)'s value smaller. Hope that helps.
And it is GDP value you're mentioning there, C+G+I+(X-M), not income.
Why at 19:55 do we think about how the quantity S-I is impacted by a different interest rate, but we do not think about how (G-T) + (X-M) curve would change under a different interest rate?
Hi sir,
In practice problem 2 of this video when net exports go up (which basically means exports>imports) so the economy will have more cash in hand so logically cash outflows should decrease as cash inflow from exports is higher than cash outflow from imports.
The net exports of a country are the value of its exports minus the value of its imports. Net capital outflow refers to the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners. Net exports are equal to net capital outflow by an accounting identity, because exports from one country to another are matched by payments of some asset from the second country to the first. In other words, when exports are greater than imports (trade surplus), it indicates that a country is a net lender to the rest of the world.
IFT Support Team
Hi,
In practice question No.2 You have mentioned that when Savings goes up (Which is part of the Aggregate income) Net exports go up, and automatically the net capital outflow.
Later on, when explaining the relationship between Investment spending and aggregate income, when explaining the graph you have said that there is a NEGATIVE relationship between Net exports and income increase? you have specifically said that imports are going to be higher? How come?
Thank you in advance
An increase in savings means higher supply of dollars available to be invested abroad. The increased supply of dollars causes the equilibrium real exchange rate to fall. Because the dollar becomes less valuable, domestic goods become less expensive relative to foreign goods, so exports rise and imports fall. This means net exports increase.
Higher domestic income leads to a higher domestic demand for all goods, both domestic and foreign. So a higher domestic income leads to higher imports, which implies decrease in net exports.
IFT Support Team
@@IFT-CFA But you also said that the increase in income causes an increase in savings. So if increase in income increases imports, but also increase in income increases savings, and so increases exports... How should i think about it? or does one have a bigger effect than the other.
Sir, I have a very specific question and I hope you will help us answering the question.
1. I have practiced all the CFA L1 problems of IFT (All topic Q-Bank and answers). Both the books.
2. I have also solved all the problems of CFA Institute study material (Chapter end Question Answers)
Will this be enough for the preparation? At this point I really don't want to practice more new questions rather would like to revise the solved one again.
Please provide your valuable insights.
We suggest that you should prepare with the High-Yield Course.
The High-Yield Course can be used on a ‘stand-alone’ basis if you are time-constrained. However, if you do have time, we recommend taking the High-Yield Course along with IFT’s regular material. This will help ensure sufficient mastery of the entire curriculum.
Many candidates complain that they forget material covered earlier. The High-Yield Course addresses this problem by helping you to quickly revise key concepts.
HY course includes:
IFT High-Yield Notes® summarize the most important concepts from each reading in 2 to 5 pages. Key formulas and facts are presented in blue boxes while examples appear in gray boxes.
IFT High-Yield Lectures® are online video lectures based on the notes. Each reading is covered in 10 to 20 minutes (total duration approx 15 hours)
High-Yield Q-Bank® has between 600 and 700 questions covering concepts which are most likely to show up on the exam. These are online with automatic grading, but you can also export them into a PDF format. All Learning outcome are covered and minimum overlap of the questions.
Key Facts and Formula Sheet: 10 pages covering key facts and formulas for all of Level I!
BONUS: You will get the IFT Mobile App FREE
You can purchase the HY course from this link:
ift.world/product/high-yield-l1/
IFT support team
Hello, can you please provide thetopic Q-bank ? i dont have anything other than the chapter-end questions and i feel they re not enough
thank you so much
Sir in 11.29 timeline in practice question , how capital flow will increase ? As you said that net export is increasing so it will earn money ? How out capital outflow please reply??
Hello Sir, seems like you have removed some previous videos of IS-LM , Any update when you update again, thanks
Can you please tell us which videos have been removed? We do not know what you mean by IS-LM.
IFT Support Team
around 19.15 sec. it said that when interest rate comes down the 2nd point is achieved at lower level of income... but i feel it shall be at higher level of income
This is great
Thanks for your comments.
IFT Support Team
In Q2 When we have savings going up ,given constant investments,shouldn't the net exports decrease ?
-When savings are up and investments are constant ,people will have more money to consume stuff and hence the imports would increase and net exports remain almost the same right? as for exports the investments are given constant so exports are not inc and imports are increasing so shouldn't net exports factor reduce due to rise in imports??
If savings are up, these savings will go abroad to finance investment in other countries. This will give a negative balance on the capital account, and enable a current account surplus. Opposite is true when savings are low.
IFT Support Team