MAcro CHAPTER 6.5:

Changes in the FOREX Market & Net Exports

CHAPTER SUMMARY

So, why do these exchange rates matter? Because they influence how much countries will import and export.

Imagine you are a US consumer buying a shirt from Bangladesh. The current exchange rate is 1 USD = 100 BDT (Bangladeshi Taka). If a company in Bangladesh wants to receive 1,000 BDT for a shirt, you will need to pay $10. However, if the USD appreciates, and the exchange rate rises to 1 USD = 200 BDT, you will now only need to pay $5 for the same shirt. On the other hand, Bangladeshis will now have to pay more than before to buy stuff from the USA.

So, this sets up our rule:

When a country's currency appreciates, it will import more and export less.
When a country's currency depreciates, it will import less and export more.

CHAPTER VIDEOS

(Just section 6.5)

CHAPTER READINGS

AP Macro Foreign Exchange Market & Net Exports | FiveableLearn about changes in the foreign market and net exports in this AP Macro Unit 6.5 guide!

How to Understand The Foreign Exchange Graph - ReviewEcon.comForeign Exchange Graphs are just supply and demand markets for a particular currency, but they can be tricky. So make sure you read this review before your next AP, IB, or College Macroeconomics Exam.

CHAPTER PRACTICE

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