Conclusions (applies to both exchange rate regimes)

Conclusions (applies to both exchange rate regimes):

An appreciation/revaluation of the domestic currency (i.e. a
decrease in E) makes domestic goods more expensive and
foreign goods cheaper. This decreases demand for the
country’s exports and increases its imports. NX therefore
decline causing planned expenditure to fall and the IS to
shift left.

Vice versa, a depreciation/devaluation of the
domestic currency (i.e. an increase in E) makes its exports
cheaper and its imports more expensive. This improves the
country’s NX and results in an increase in planned
expenditure and a shift of the IS to the right.
An increase in foreign income increases demand for the
domestic goods i.e. exports increase. The increase in
exports causes the IS curve to shift right and vice versa.