Edexcel A Level Economics A:复习笔记2.2.5 Net Trade (X-M)
Influences on the Net Trade Balance
- The?net trade balance?is the difference between the?value?of the?exports and imports (X-M)
- The net trade balance is influenced by changes to real income,?exchange rates, state of the world economy, and the?degree of?protectionism
A Table Showing How Changes to Each of the Influencing Factors Effects Exports & Imports
| Change in Condition | Effect on Exports | Effect on Imports | (X-M) |
| UK real income increases | Little effect | Consumers purchase more | Trade balance weakens |
| Real income increases abroad | Foreigners?purchase more?UK products - exports increase | Little effect | Trade balance strengthens |
| UK ￡ appreciates | Exports?more expensive?for foreigners - exports decrease | Consumers' money goes further abroad - imports increase | Trade balance weakens |
| UK ￡ depreciates | Exports?less expensive?for foreigners - exports increase | Consumers' money is?worth less?abroad - imports decrease | Trade balance strengthens |
| World economy booms | Increased demand?for UK exports | Little effect | Trade balance strengthens |
| World economy slows | Decreased demand?for UK exports | Little effect | Trade balance weakens |
| Protectionism increases | Depends on?retaliation measures?from other countries | Decreased demand for imports as they are more expensive | Trade balance strengthens |
| Protectionism decreases | Likely to increase | Increased demand for imports as they are less expensive | Trade balance weakens |
Exam Tip
When?evaluating the extent?to which the trade balance strengthens or weakens?as a result of exchange rate changes, remember that it is dependent on the?price elasticity of demand (PED) of the exports and imports.
This is explained by the?Marshall Lerner Condition?and the?J Curve.
The?Marshall-Lerner Condition?states that the depreciation/devaluation of a country's currency will lead to an improvement in its net trade balance only if the sum of the?price elasticities of its exports and imports is greater than one
The?J Curve?argues that a?net trade balance will worsen?in the short term?after a currency devaluation,?but then improve?in the medium to longer term.
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