Th4.5: ^^ Trade Balance Flashcards
1
Q
What will a rise in taxes do?
A
decrease income and therefore decrease consumption - theoretically this will also mean consumers spend less on imports
2
Q
Imports in the UK have been found to be…
A
highly income elastic
3
Q
As a result, the trade balance will improve…
A
improve in the short run
4
Q
However, in the long run…
A
lower AD will reduce businesses’ need to invest and this could reduce competitiveness meaning exports decrease
