Appreciation & Depreciation of a currency and Net Exports or Xn

After a currency depreciates: Exports will increase because that nation’s products are cheaper to foreigners. This helps domestic companies that export that nation’s products. It helps foreign importers of that nation’s products. It also helps foreign travelers to that nation. Imports will go down as foreign products become more expensive. That hurts foreign companies that export products to that nation. It hurts domestic companies that import foreign products. It also hurts citizens of that nation who travel to foreign countries. So, since Exports go up and Imports go down, Xn Increases. Remember, Xn = Exports minus Imports.

After a currency appreciates: Exports will decrease as that nation’s products become more expensive. This makes it more expensive for domestic companies to export that nation’s products. It also hurts foreign travelers to that nation. Imports will increase as that nation has more buying power. This helps foreign companies that export products to that nation. It helps domestic companies that import foreign products. It also helps citizens of that nation who travel to foreign countries. So since Exports go down and Imports go up, Xn Decreases. Remember, Xn = Exports minus Imports.