The depreciation of the domestic currency causes exports to rise and imports to fall. Because net exports are one component of aggregate demand, this increase in net exports (exports minus imports) causes an increase in aggregate demand at each price level.

What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand? Net exports would fall which by itself would decrease U.S. aggregate demand.

What will a rise in net exports do? Shift the aggregate demand curve to the right. The ___ is when a higher price level reduces the purchasing power of the public’s accumulated savings balances. output prices are flexible but input prices are fixed or highly inflexible.

Export costs rise: If the U.S. dollar appreciates, foreigners will find American goods more expensive because they have to spend more for those goods in USD. That means that with the higher price, the number of U.S. goods being exported will likely drop.

When the dollar depreciates against foreign currencies, exports should increase and imports should decrease. This is because US products get cheaper for foreigners, and their products get to be more expensive for the US. In such a case, there gets to be increased demand for American products.

Trade deficits are the difference between how much a country imports and how much it exports. When done right, they can let trading partners specialize in their strengths and create wealth for all consumers. Gone wrong, they can harm labor markets and create problems of savings and investment.