Net Exports and Exchange Rates

What is the formula for Net Exports (NX)?

NX = X - M

How does a foreign boom affect a nation's exports?

It increases demand for exports, shifting AD to the right.

How does a domestic recession affect imports?

It reduces demand for imports, lowering M.

What does the economic acronym SPICED stand for?

Strong Pound Imports Cheaper, Exports Dearer.

How does a strong currency (SPICED) affect Aggregate Demand (AD)?

It causes AD to shift to the left (decrease).

What does the economic acronym WPICED stand for?

Weak Pound Imports Costlier, Exports Cheaper.

How does a weak currency (WPICED) affect Aggregate Demand (AD)?

It causes AD to shift to the right (increase).

How is a trade surplus defined in economic terms?

When total export value is greater than import value.

What does the variable 'M' represent in trade equations?

Total import expenditure leaving the country.

Why does an increase in Net Exports (NX) shift AD to the right?

Because NX is a component of total Aggregate Demand.