If the real exchange rate rises, domestic goods become more expensive overseas, which lowers aggregate demand and depresses domestic output.

An increase in the real exchange rate means foreign goods become more expensive relative to domestic goods, indicating a real depreciation for the home economy.

If the real exchange rate rises, domestic producers face weaker international competitiveness, so net exports fall and domestic output declines.

When the real exchange rate increases, it signals that foreign goods are cheaper, so domestic consumers substitute away from locally produced goods toward imports.

A higher real exchange rate automatically reduces the nominal exchange rate, thereby stabilizing domestic prices without affecting output.

Real exchange rate movements do not significantly affect employment, since any rise in exports is offset by an equivalent fall in domestic consumption.

When the home currency depreciates in real terms, exports become more competitive abroad and imports become more costly, raising aggregate demand and boosting domestic output.