Edexcel A Level Economics A:复习笔记2.2.5 Net Trade (X-M)

Category: A-level课程, 教材笔记, 福利干货 Date: 2022年9月27日上午10:12

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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