Cards (40)

    • Net exports (X-M) represent the difference between a country's exports and imports
    • What is the formula for calculating net exports (X-M)?
      XMX - M
    • A positive value of net exports indicates a trade surplus
    • A weaker domestic currency makes exports cheaper and imports more expensive.
    • Increased global economic growth leads to higher demand for exports
    • What is the impact of net exports on aggregate demand (AD)?
      Positive if surplus, negative if deficit
    • Match the component of net exports with its definition and impact on AD:
      Exports (X) ↔️ Goods and services sold to foreign markets; Increase AD
      Imports (M) ↔️ Goods and services purchased from foreign markets; Decrease AD
    • Together, exports and imports determine the net exports, which is a key factor in aggregate demand (AD).
    • What is the effect of a weaker domestic currency on exports?
      Exports increase
    • Strong global economic growth boosts demand for exports
    • Competitive domestic prices and high-quality products increase exports.
    • What is the effect of a stronger domestic currency on imports?
      Imports increase
    • High national income in a country leads to increased imports
    • Exports generate revenue for the domestic economy and increase aggregate demand (AD).
    • Why does a weaker domestic currency increase exports?
      Makes exports cheaper for foreign buyers
    • A stronger domestic currency makes imports cheaper
    • A stronger domestic currency makes imports cheaper
    • High national income boosts import demand.
    • When are imports favored over domestic goods?
      Domestic prices are higher
    • Trade policies such as tariffs can restrict import quantities
    • If the UK pound strengthens against the US dollar, imports of US-made electronics to the UK will likely rise.
    • What is the formula for aggregate demand (AD)?
      AD=AD =C+ C +I+ I +G+ G +(XM) (X - M)
    • Exports increase aggregate demand.
    • Imports decrease aggregate demand as domestic spending shifts to foreign goods and services.
    • What factor makes exports cheaper and increases foreign demand?
      Weaker domestic currency
    • A trade surplus boosts aggregate demand.
    • How are net exports calculated?
      XM=X - M =ExportsImports Exports - Imports
    • A weaker domestic currency makes exports cheaper.
    • What happens to AD if a country experiences a trade deficit?
      AD decreases
    • A positive value of net exports indicates a trade surplus
    • What are three factors that influence net exports?
      Exchange rates, global economic growth, domestic economic conditions
    • Order the steps in calculating net exports and their impact on aggregate demand.
      1️⃣ Calculate exports and imports
      2️⃣ Subtract imports from exports to find net exports
      3️⃣ Net exports influence aggregate demand
      4️⃣ Aggregate demand affects economic output
    • What impact do exports have on aggregate demand?
      Increase AD
    • Free trade agreements improve exports by reducing trade barriers
    • How does a stronger domestic currency affect imports?
      Increases imports
    • Exports increase domestic production and employment.
    • A trade surplus contributes positively to aggregate demand
    • What are the net exports if exports are £500 billion and imports are £450 billion?
      £50 billion
    • Global economic conditions influence exports.
    • What happens to aggregate demand if a country experiences a trade deficit?
      AD decreases