2.2.5 Net Trade (Macro)

EXPORTS

Exporting is the act of selling goods and services to another country. Income from exports counts as an injection into the circular flow of income and adds to aggregate demand (AD)

TRADE BALANCE

The trade balance is the difference between the value of exports and imports

TRADE BALANCE SURPLUS

When the value of exports is greater than the value of imports

TRADE BALANCE DEFICIT

When the value of imports is greater than the value of exports

NET TRADE

A country's net trade balance is the difference between the value of its exports and the value of its imports over a specific period, usually a year

AGGREGATE DEMAND

Consumer Spending + Business Investment + Government Spending + Net Exports

FACTORS INFLUENCING EXPORTS OF GOODS & SERVICES

Relative Prices of Exports in World Markets (competition), The Exchange Rate (high currency value makes exports more expensive), Non- Price Demand Factors (design, branding, trends), Strength of Aggregate Demand

FACTORS AFFECTING AGGREGATE DEMAND

Higher currency value (high value makes goods more expensive), Increase in Income (more disposable income/ consumer spending) , Inflation (increase makes the cost of goods and services increase), Government policies (tariffs)