a) Influences on net trade

• define the net trade balance

• revenue from exports - expenditure on imports

• state what is meant by a positive trade balance

• state what is meant by a negative trade balance

• export revenue > import expenditure

• export revenue < import expenditure

• state the four factors that influence the net trade balance

• real income

• exchange rate

• world economy

• degree of protectionism

• describe the effect on the trade balance when real income increases in the UK

• describe the effect on the trade balance when real income increases abroad

• more demand for imports

• weak trade balance

+

• more demand for exports

• strong trade balance

• describe a strong exchange rate’s effect on the trade balance

• describe a weak exchange rate’s effect on the trade balance

• higher £ value

• expensive exports + cheap imports

• weak trade balance

+

• lower £ value

• cheaper exports + expensive imports

• strong trade balance

• describe the effect on the trade balance when the world economy declines

• describe the effect on the trade balance when the world economy grows

• less demand for exports

• weak trade balance

+

• more demand for exports

• strong trade balance

• describe a low protectionism’s effect on the net trade balance

• describe a high protectionism’s effect on the net trade balance

• no tariffs

• cheap imports

• weak trade balance

+

• tariffs

• expensive imports

• strong trade balance