The graph at the left is the familiar IS/LM diagram. Adding the effect of a foreign sector does not change the diagram very much; the only thing it changes are the factors that shift the curves. Here, not only do changes in investment, consumption, taxes, and government spending shift the IS curve, the IS curve also shifts due to changes in net exports (exports – imports). The graph at the right shows the Interest parity curve – the graphical relationship between domestic interest rates and the exchange rate. Notice, it is downward sloping. This is because higher domestic interest rates increase the demand for domestic currency, leading to an appreciation of the domestic currency (shown as a move leftward on the horizontal axis). Let's work with this figure to see how a decrease in money growth will affect output, the interest rate, and the exchange rate.