How Does a Lower Real Interest Rate Increase Net Exports?

A lower real interest rate leads to more aggregate expenditure, and therefore to greater output. And finally, we have net exports, which we looked out in the international finance episode. Net exports also go up when the real interest rate falls. So what's that going to mean about the supply of dollars in currency markets? That means there will be more dollars being supplied. If there's an increase in a supply of dollars, the price of the us Dollar will fall. And that weaker dollar is good for exports. It's like everything that the us. Produce s just got cheaper for the rest of the world.