When the exchange rate appreciates, the current account moves into deficit causing the aggregate demand curve to shift to the left.

Name: When the exchange rate appreciates, the current account moves into deficit causing the aggregate demand curve to shift to the left.
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Question

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When the exchange rate appreciates, exports become more expensive and imports cheaper, reducing net exports. This can lead to a current account deficit and a decrease in aggregate demand, shifting the curve to the left.

When the Exchange Rate Appreciates, the Current Account Moves into Deficit