The core link: exchange rates → net exports
How appreciation reduces net exports
How depreciation increases net exports
Connection to aggregate demand
Showing the full chain: forex → NX → AD
Dollar appreciation → AD decreases
Dollar appreciation → NX↓ → AD shifts left → lower Real GDP and PL
Dollar depreciation → AD increases
Dollar depreciation → NX↑ → AD shifts right → higher Real GDP and PL
Summary: exchange rate changes and their effects
Why this matters on the AP Exam
AP Exam Tips
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Common Mistakes
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Unit 6 topics
Unit 6 overview6.1Balance of Payments Accounts6.10Economic Integration and Trade Agreements6.2Exchange Rates6.3The Foreign Exchange Market6.4Effect of Changes in Policies and Economic Conditions on the Foreign Exchange Market6.5Changes in the Foreign Exchange Market and Net Exports6.6Real Interest Rates and International Capital Flows6.7The Effect of Trade Policies6.8Fiscal and Monetary Policies in Open Economies6.9Exchange Rate Regimes