Government expenditure and net trade mindmap

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  • Exports and Imports
    • exports are g&s sold to foreigners. Imports are bought from foreigners.
    • net exports are X-M.
    • In the UK, and other economies like this, exports are an important part of total demand in the economy.
    • Government expenditure and net trade
      • Factors affecting the demand for X and M:
        • Price- higher price= less demand. E.g imports from China have increased as UK domestic producers cannot compete with their prices (M).
        • Real income in the domestic economy- if the economy is doing well and real incomes are rising, they will spend more, partly on imported goods (M).
        • the exchange rate- a rise in the value of the £ means it costs foreigners more to get UK exports (X), it also means UK consumers can afford to buy more imports (M).
        • State of the world economy- if the UKs main trading partners are doing well, exports are likely to rise. Recession in the EU could lead to a fall in exports.
        • Degree of protectionism- most ocuntries limit the ways some g&s come into their economies. E.g through quotas or tariffs. A greater degree of protectionism means its harder for the UK to export.
        • Non-price factors- quality, patents,etc.


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