#AP Macroeconomics: Currency Fluctuations & Net Exports 🚀

Hey! Let's break down how currency values affect net exports and the overall economy. This is a crucial topic, so let's make sure you've got it down pat for the exam!

#Currency Appreciation & Its Impact

#What is Currency Appreciation?

• Currency appreciation means a country's currency becomes stronger relative to others. Think of it as your money buying more stuff in other countries.
• This can happen due to a strong economy, higher demand for the currency, or increased interest rates.

#Impact on Net Exports

• Exports become more expensive: When your currency is strong, your goods cost more for other countries to buy. This leads to a decrease in demand for your exports. 📉
• Imports become cheaper: A stronger currency means you can buy more foreign goods for less. This increases demand for imports. 🛍️
• Net Exports Decrease: Since exports fall and imports rise, net exports (Exports - Imports) decrease. 📉

#Example: Mexico and the Peso

• Tourists flock to Mexico, increasing demand for the peso. The peso appreciates.
• Mexican goods become more expensive for foreigners, decreasing exports.
• Mexicans buy more cheaper foreign goods, increasing imports.
• Net exports decrease, which in turn decreases aggregate demand. 📉

#Currency Depreciation & Its Impact

#What is Currency Depreciation?

• Currency depreciation means a country's currency becomes weaker relative to others. ...