2.2.5 Trade Balance

Question 1

Explain the meaning of Trade Balance

Answer 1

net sum of a countries exports and imports of goods

Question 2

Explain the difference between Exports and Net Exports

Answer 2

Exports are total exports

Net exports are exports minus imports

Question 3

Explain the effect of an increase in Imports on AD

Answer 3

depreciation in exchange rate, making imports more expensive so AD goes down

Question 4

Explain the impact of an increase in real incomes on the trade balance

Answer 4

increase of real income = increased spending on imports, negative trade balance

Question 5

Explain the impact of depreciation of the £ on the trade balance

Answer 5

a weaker £, exports go up, positive impact on the trade balance

Question 6

Explain which would have the largest effect on the trade balance: a depreciation of the £ against the € or a depreciation of the £ against the Peruvian Sol

Answer 6

a depreciation of the £ against the €

Question 7

Explain the effect of a recession in a major trading partner on the UKs trade balance

Answer 7

importing less despite being cheaper

Question 8

Explain the effect of increasing protectionism on the UK’s trade balance

Answer 8

positive effect as people import less as charged more

Question 9

Explain what ‘non price factors’ might affect the UK’s trade balance

Answer 9

quality of goods and services