6.4 Changes in the Foreign Exchange Market and Net Exports

• A rise in interest rates attracts foreign capital, causing the currency to appreciate.

  True
• What do exports represent in net exports?

  Goods sold abroad
• Lower inflation rates tend to appreciate a country's currency
• When demand for a currency decreases, its value depreciates
• What is the role of net exports in an economy?

  Component of aggregate demand
• Order the effects of the following factors on exchange rates:

  1️⃣ Higher demand for goods

  2️⃣ Lower inflation rates

  3️⃣ Higher interest rates

  4️⃣ Government policies
• A currency appreciation leads to a decrease in net exports.

  True
• When demand for a currency increases, its value appreciates
• Net exports are calculated as total exports minus total imports
• What formula is used to calculate net exports?

  Exports - Imports
• What is the foreign exchange market called?

  Forex market
• What happens to a currency's value when inflation rises?

  Depreciates
• A depreciation of a country's currency improves its net exports.


  True
• When a currency depreciates, exports become cheaper for foreign buyers.
• A depreciation of the U.S. dollar makes U.S. goods cheaper for Canadians.
• What is the foreign exchange market called?

  Forex market
• What happens to a currency's value when inflation rises?

  Depreciates
• A depreciation of a country's currency improves net exports.


  True
• When a country's currency depreciates, its net exports increase.


  True
• Higher interest rates attract foreign capital, causing the currency to appreciate.


  True
• The formula for net exports is total exports minus total imports
• Which inflation rate leads to currency appreciation?

  Lower inflation
• What happens to net exports when a country's currency depreciates?

  Increase