Determimants Of X-M Flashcards
1
Q
5 determinants of net exports
A
Real disposable income abroad Real disposable income at home The domestic price level The exchange rate Government restriction on free trade
2
Q
How does RDI abroad affect trade?
A
More RDI abroad = we can export more
- in a foreign recession, we export less as foreigners have less RDI
3
Q
How does RDI at home affect imports?
A
More RDI at home = more imports
A recession means we import less
4
Q
How does domestic price level affect trade?
A
In times of inflation, UK Products are less competitive, so exports fall and imports increase, due to higher prices of our goods
5
Q
How does the exchange rate affect trade?
A
Strong pound- imports cheap exports dearer
Weak pound- imports dear, exports cheaper
