a) Influences on net trade

a) the main influences on the (net) trade balance: real income, exchange rates, state of the world economy, degree of protectionism, non-price factors

trade balance = revenue from exports - expenditure on imports

• positive net trade balance = export revenue > import expenditure

• negative net trade balance = import expenditure > exports revenue

real income increases in the UK

• more demand for imports

• negative trade balance

real income increases abroad

• more demand for exports

• positive trade balance

high exchange rate

• higher £ value

• expensive exports + cheap imports

• negative trade balance

low exchange rate

• lower £ value

• cheap exports + expensive imports

• positive trade balance

world economy declines

• less demand for exports

• negative trade balance

world economy grows

• more demand for exports

• positive trade balance

low protectionism

• no tariffs

• cheap imports

• negative trade balance

high protectionism

• tariffs

• expensive imports

• positive trade balance