How changes in net exports affect AD

• When the exchange rate is strong a country's exports become more expensive in foreign markets whilst imports become relatively cheaper
• Stronger pound makes imports cheaper but exports for other countries expensive
• When the exchange rate is strong what happens to imports?

  • become cheaper
• When the exchange rate is strong what happens to exports for foreign economies?

  they increase
• What is a falling exchange rate?:

  • when the value of one currency in terms of another depreciates
• What is a falling exchange rate?

  • when the value of one currency in terms of another depreciates