Factors affecting Net exports

Real disposable income earned abroad (boom)

The marginal propensity to import goods is likely to increase, shifting the AD curve right

Real disposable income earned abroad (recession)

The marginal propensity to import goods is likely to decrease, shifting the AD curve left

Real disposable income earned abroad (boom)

The marginal propensity to import goods is likely to increase, shifting the AD curve right

Real disposable income earned abroad (recession)

The marginal propensity to import goods is likely to decrease, shifting the AD curve left

Real disposable income earned at home (boom)

The marginal propensity to import is likely to increase and import expenditure rises pulling down net export value, shifting the AD curve left

Real disposable income earned at home (recession)

The marginal propensity to import is likely to decrease and import expenditure falls pulling up net export value, shifting the AD curve right

Strong exchange rate (SPICED)

The strong pound makes imports cheaper and exports more expensive, so demand falls and revenue falls, shifting the AD curve left

Weak exchange rate (WIDEC)

The weak pound makes imports expensive and exports cheaper, so demand rises and revenue rises, shifting the AD curve right

Protectionism at home and abroad

Strong protectionism abroad like tariffs makes value of export fall, shifting the AD curve left

Relative inflation levels at home (high)

High relative inflation reduces export competitiveness and reduces export revenue, shifting the AD curve left

Relative inflation levels at home (low)

Low relative inflation increases export competitiveness and increases export revenue, shifting the AD curve right