How a domestic economy connects to the rest of the world. The balance of payments, how the foreign exchange market sets exchange rates, what makes a currency appreciate or depreciate, and how exchange rates affect net exports and capital flows.
Seven topics from the College Board CED, in order.
Topic 6.1
Balance of Payments Accounts
The current account and the financial/capital account — how a country's international transactions are recorded.
Topic 6.2
The Foreign Exchange Market
How currency supply and demand determine the exchange rate in a floating exchange rate system.
Topic 6.3
Changes in Exchange Rates
How relative income, prices, interest rates, and preferences shift currency supply and demand, changing the exchange rate.
Topic 6.4
Exchange Rates & Net Exports
How an appreciating or depreciating currency makes exports more or less competitive, affecting net exports and aggregate demand.
Topic 6.5
Real Interest Rates & Capital Flows
How relative real interest rates across countries drive international capital flows and currency demand.
Topic 6.6
Policy Effects on Exchange Rates
How monetary and fiscal policy changes ripple through interest rates, capital flows, and the exchange rate.
Topic 6.7
Government Policy & the Trade Balance
How tariffs, quotas, and other trade policies affect the balance of trade and connect back to comparative advantage from Unit 1.
About Unit 6
Unit 6 closes out AP Macroeconomics by opening up the model to the rest of the world. Every prior unit largely treated the domestic economy in isolation — Unit 6 adds in how countries trade goods and exchange currencies with each other. You'll learn how the balance of payments tracks a country's international transactions, how the foreign exchange market sets exchange rates through ordinary supply and demand, and how a stronger or weaker currency ripples through net exports, aggregate demand, and even back to interest rates and capital flows.
This unit is roughly 10–13% of the AP Macro exam and takes about 9–11 class periods. It's the smallest unit by weight, but it directly connects back to Unit 1 (comparative advantage and trade) and Unit 4 (interest rates and capital markets) — a strong grasp of those units makes Unit 6 come together quickly.
The College Board ties Unit 6 to three Big Ideas that recur across the whole course:
Big Idea 1
Exchange rates are prices, set by supply and demand
Big Idea 2
A stronger currency cuts both ways for trade
Big Idea 3
Capital flows and exchange rates are tightly linked