6. Net Exports and AD

types of net exports

RDI abroad, RDI at home, Strong/Weak exchange rates, Protectionism, Relative inflation levels

RDI earned abroad

increase in income abroad leads to demand for exports leading to increase in net exports (ceteris paribus)

RDI earned at home

increase in income at home leads to demand for imports leading to net exports going down (ceteris paribus)

Strong / Weak exchange rates

SPICED shifts left, WIDEC shifts right

SPICED

Strong Pound Imports Cheap Exports Dear

WIDEC

Weak Imports Dear Exports Cheap

Protectionism at home + abroad

tariffs, quotas, sanctions, embargos on exports limits access to international markets, AD shift left

Relative inflation levels

if home inflation increases, demand for X decreases, reduces X competitiveness, imports get more competititve