Question 1

What happens to a country's net exports when the country's currency appreciates?

Accepted Answer

The net exports decrease because domestic goods are more expensive for other countries to import

(and vice versa if the currency depreciates)

Question 2

How will tariffs on Canadian goods affect Canadian aggregate demand?

Accepted Answer

Tariffs on Canadian goods will depreciate the Canadian dollar

Depreciating the Canadian dollar makes Canadian goods cheaper

Cheaper goods lead to more exports, increasing Canadian AD

6.5 Changes in the FOREX Market and Net Exports, AP Macroeconomics Flashcards