NET EXPORTS AND AD

Question 1

What happenswhen value of net exports increases

Answer 1

ad shifts right

exports increase imports decrease

Question 2

what 5 factors affect ent exports

Answer 2

real disposable income earned abroad

real disposable incoem earned at home

exchange rate strength

protectionsims at home and abroad

relative inflation elvels at home

Question 3

in terms of real disposable incoem abroad what happens if theres a boom abroaf

5 marks

Answer 3

forreignes have higher incomes

so MP import goods increases for forreign goods

so demad for exports in UK icnrease

so more export revenue

shifting AD right because val of net exports increased

Question 4

if theres a recession abroad for example with Germany who is one of ourbiggest trading aprtenrs what will happen

5 marks

Answer 4

incomes decrease/lower MPI

demand for UK E decreases

reduction in export rev

left shift of AD as value of net exports decrease

Question 5

explain how real disposable Y earned at home - boom in UK affects net exports

Answer 5

MPI Uk increases

import expenditure rises

increases negative value of net exporrs

shifts AD rught

Question 6

explain how a recession at home can actually be ebenfitcial for net exports

Answer 6

people are poorer ( as less demand , firms decrease output so to save cost sreduce workforce)

MPI decreases

import expenditure falls

negatove val of net exports decreases

shifting AD right

Question 7

how does strong exchange rate affect net exports

6 marks

Answer 7

Imports cheap

in theory demand for M and expenditure for M rise increasing M (sucking in of imports effect)

exports more expensive so demand as well as export revenuedecreases

therfore we have a lower X value and higher M value

shifting AD left

so strong currency bad for eon in terms of AD

Question 8

explain how weak imports affect net exports
4 marks

Answer 8

imports expensive so demand and import rev decrease .

causing value of M to decrease

exports chaper so more demand and export rev increasing value of X

value of X bracket becomes higher shifting AD right

Question 9

why is a weaker ER for a trading econ liek Japan good q

Answer 9

net exports increase

AD shifts right

Question 10

how does strong protectionsims abroad affect ent exports

Answer 10

tariffs/quotas/sanctions on Uk exports can prevent us accessing international mkts with our exports

this reduces amount of export rev we can gen

reduces val of X-M shifting AD left

Question 11

how is at home protectionsim being strong affect net exports 3 marks

Answer 11

harder to access imports + usually mroe expensive

so val of M expenditure decreases shifting AD right

as value of X-M increases as negative val gets smaller

Question 12

why is relative in relative inflation levels t home important

Answer 12

gota compare toothercunch

Question 13

explain how X-M affected if high inflation in UK compared to other trading countries

Answer 13

exports less copm as more expensive

so demand for exports decrease

export rev decreases

shift AD left

Question 14

if inflation is low in Uk this makes our exports rome

Answer 14

competitve

Question 15

effect of high inflation on imports

Answer 15

imports more comp as cheaper to buy g/s abroad as opposed to suffering from inflation

M expenditure increases

X-M becomes lower

shift AD left