Government Expenditure and Net Trade

Question 1

what are the reasons for government spending

Answer 1

• provide goods and services for their citizens (education, healthcare)
• adjust demand over the trade cycle
• to achieve other objectives as part of their fiscal policy

Question 2

what influences the demand for exports and imports?

Answer 2

• price
• exchange rate
• degree of protectionism
• non-price factors
• state of the world economy

Question 3

how does price influence the demand for exports and imports?

Answer 3

buyers make decisions partly on price, high price - the lower QD

Question 4

how does the exchange rate influence the demand for exports and imports?

Answer 4

a rise in the value of the pound means foreign buyers can buy fewer pounds with their currency making UK exports less price competitive and so exports would fall. imports become more price competitive for UK buyers as buyers can buy things more cheaply with pounds .
SPICED

Question 5

how does the degree of protectionism influence the demand for exports and imports?

Answer 5

high protectionism makes it more difficult to import and export e.g. tariffs and quotas make it more expensive

Question 6

how do non-price factors influence the demand for exports and imports?

Answer 6

products may have a unique design protected by patents or they could have a unique service like next day delivery. different factors affect the competitiveness

Question 7

how does the state of the world economy influence the demand for exports and imports?

Answer 7

if UK’s main trading partners are doing well economically then exports are likely to rise. recession in the EU is likely to lead to a drop in exports