Changes in government expenditure (G) and net export revenue (X-M)

Question 1

Government expenditure

Answer 1

• Gov. spending on final G&S (NS, edu, CC)
• Determined by political, social, econ reasons
• E.g. improve healthcare, intervene in econ recession

Question 2

Net Export Revenue

Answer 2

• Value of exported G&S - Value of imported G&S

- Import expenditure not part of domestic output, not in AD

Question 3

Changes in relative income

Answer 3

• Demand for exports depending on national income of economy’s trading partners
• Rising trading partner’s income, more exports, X-M increase
• Rising domestic income, more imports, X-M decrease

Question 4

Relative prices with other economies

Answer 4

• Inflation rates in other countries relative to that of domestic
• Falling foreign inflation, more expensive local imports (their exports)
• Changes in exchange rate (appreciation of SGD against USD)
• Buy fewer G&S from weaker currency, more G&S for stronger currency

Question 5

Relative quality of goods produced locally compared to foreign goods

Answer 5

• Quality of local G falls, decreased demand for local, increased demand for foreign

Question 6

Trade policies

Answer 6

• Involving varies countries (2020 Regional Comprehensive Economic Partnership by Asia-Pacific regions including SG)
• Lowered trade barriers, tariffs, tax on imports
• Boosts export revenue of member countries