Governmet expenditure and net trade 2.2.4 unit 26 Flashcards
What are the reasons for government spending?
To try to stop market failures are improve citizens welfare.
How does the exchange rate impact (X-M)?
If there is a rise in the value of the pound it means it costs foreigners more to buy pounds in there local currency. This results in UK goods being less competitive in price.
How does the real income in the domestic economy impact (X-M)?
If the domestic economy is thriving and growing rapidly it results in households incomes rising. This results in there disposable income rising meaning that they will spend more including imported goods.
How does the state of the world economy impact (X-M)?
If he Uk’s main trading partners are doing well economically then domestic exports are likely to increase.
How does the degree of protectionism impact (X-M)?
If the degree of protectionism internationally (whether they limit imports with tariffs or alike) is high then it will be difficult for British companies to exports lots of product.
How does the non price factors in the economy impact (X-M)?
Some products are commodities and only sold on price, However other products are also bought with other considerations such as quality or availability.
