Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dollar to rise in foreign exchange markets. the number of domestic products purchased by foreigners (exports) will therefore fall , and the number of foreign products purchased by domestic consumers and firms (imports) will rise. net exports will therefore fall, causing the quantity of domestic output demanded to fall . this phenomenon is known as the exchange rate effect.

Juanita and sam attend a beach party and notice that the local beach appears to have a great deal more trash washed up on shore than it did when they were young. the water doesn't appear nearly as clear, and there seems to be less evidence of small water creatures living in the shallows. an afternoon at the local library convinces them that one major cause is the new factory nearby. after some discussion, they decide their next step should be identifying the cause of the changes identifying the problem picketing the guilty factory lobbying their elected representatives to complain about the problem talking to a local environmental group about solutions