Suppose aggregate prices in the economy fell
This would cause the demand for money to shift in, causing interest rates to decline
Alternatively, the real money supply (M/P) rises, causing interest rates to fall.
With lower interest rates, the opportunity cost of consumption is lower:
P↓ Md↓ i↓ C↑
With lower interest rates, the direct cost of investment falls:
P↓ Md↓ i↓ I↑
With lower interest rates a country’s currency will depreciate. A weaker currency makes exports cheaper and imports more expensive
P↓ Md↓ i↓ Exchange Rate↓ NX↑