AP Macroeconomics / Unit 6: Open Economy: International Trade and Finance
6.5 Changes in the Foreign Exchange Market and Net Exports
Notes
- Currency appreciation → exports fall, imports rise → $X_N$ falls → AD shifts left.
- Depreciation → $X_N$ rises → AD shifts right.
Practice
The dollar appreciates. US net exports:
Exports cost more abroad.
A depreciation of a country's currency tends to shift its AD:
Higher net exports.
A strong currency benefits:
It buys more abroad.
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