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What is the effect on aggregate expenditure of exports exceeds imports?
Answer. Answer: If a country exports a greater value than it imports, it has a trade surplus or positive trade balance, and conversely, if a country imports a greater value than it exports, it has a trade deficit or negative trade balance.
What happens if exports exceed imports?
When exports exceed imports, the net exports figure is positive. This indicates that a country has a trade surplus. When exports are less than imports, the net exports figure is negative. This indicates that the nation has a trade deficit.
The aggregate expenditure function
Images related to the topicThe aggregate expenditure function
How do exports affect aggregate expenditures?
Net exports (exports minus imports) affect aggregate expenditures in an open economy. Exports expand and imports contract aggregate spending on domestic output. Exports (X) create domestic production, income, and employment due to foreign spending on U.S. produced goods and services.
How does imports affect aggregate expenditure?
A lower marginal propensity to consume, a higher tax rate, and a higher marginal propensity to import will all make the slope of the aggregate expenditure function flatter—because out of any extra income, more is going to savings or taxes or imports and less to spending on domestic goods and services.
How can aggregate expenditure be increased?
A rise in expenditure by either Consumption, Investment or the Government or an increase in exports or a decrease in imports leads to a rise in the aggregate expenditure and thus pushes the economy towards a higher equilibrium and thus reaching a higher level towards the potential GDP.
What happens if aggregate expenditure is greater than total income?
If aggregate expenditures exceed real GDP, then firms will increase their output and real GDP will rise. If aggregate expenditures equal real GDP, then firms will leave their output unchanged; we have achieved equilibrium in the aggregate expenditures model.
When a country exports more than it imports it has a?
A country that imports more goods and services than it exports in terms of value has a trade deficit while a country that exports more goods and services than it imports has a trade surplus.
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If aggregate expenditure exceeds the potential output of the economy, … government purchases, and net exports, equal to exports minus imports.
When exports are greater than imports there is a favorable balance of trade?
If the exports of a country exceed its imports, the country is said to have a favourable balance of trade, or a trade surplus. Conversely, if the imports exceed exports, an unfavourable balance of trade, or a trade deficit, exists.
How does foreign trade affect the aggregate demand of a country?
A higher exchange rate tends to reduce net exports, reducing aggregate demand. A lower exchange rate tends to increase net exports, increasing aggregate demand. Foreign price levels can affect aggregate demand in the same way as exchange rates.
What decreases aggregate expenditure?
Aggregate expenditures will vary with the price level because of the wealth effect, the interest rate effect, and the international trade effect. The higher the price level, the lower the aggregate expenditures curve and the lower the equilibrium level of real GDP.
What causes the aggregate expenditure curve to shift?
Compared to the simplified aggregate expenditures model, the aggregate expenditures curve shifts up by the amount of government purchases and net exports.An even more realistic view of the economy might assume that imports are induced, since as a country’s real GDP rises it will buy more goods and services, some of …
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What causes the aggregate expenditure curve to shift upward?
An increase in the expenditure by consumption (C) or investment (I) causes the aggregate expenditure to rise which pushes the economy towards a higher equilibrium.
Which of the following is likely to occur when aggregate expenditures are so high that the?
If the MPC =. 8, what will be the new equilibrium GDP? Which of the following is likely to occur when aggregate expenditures are so high that the equilibrium level of GDP is beyond the potential output? Nominal GDP is likely to increase, but real GDP is not likely to increase.
What is import expenditure?
Import expenditure is the expenditure made by domestic residents on foreign goods and services which is the product of the price and the quantity. An increase in tariffs will lead to a rise in the prices of imports as importers will increase prices to maintain profitability.
How do you calculate aggregate expenditures and imports of goods and services?
Aggregate expenditure is defined as the value of all of the completed goods and services that currently exist in a country. It’s determined by calculating the sum of household consumption, investment, government spending, and net exports. In order to determine net exports, you subtract total imports from total exports.
Which factors make the aggregate expenditure line steeper?
However, the slope of the aggregate expenditures line is based on all induced factors. If investment and government purchases are induced in addition to consumption, then the slope is steeper and the multiplier is bigger. If taxes and imports are also induced, then the slope is flatter and the multiplier is smaller.
When aggregate expenditure is less than GDP Which of the following is true?
When aggregate expenditure is less than GDP, which of the following is true? There was an unplanned increase in inventories. if aggregate expenditure is greater than GDP, how will the economy reach macroeconomic equilibrium? Inventories will decline, and GDP and employment will rise.
When using the aggregate expenditures model if expenditures change?
When using the aggregate expenditures model, if expenditures change: the model will move to a new equilibrium. If the MPC equals 0.8, an increase in taxes of $5 billion will result in an overall decrease in real GDP of $_____ billion.
What is the relationship between aggregate income and aggregate expenditure?
Aggregate Income = GDP = Aggregate Expenditure.
**The expenditure approach adds up the total spending on new production, while the income approach adds up all of the income earned by the resource suppliers in producing those goods and services.
How does an increase in government spending affect the aggregate expenditure line?
How does an increase in government spending affect the aggregate expenditure line? It shifts the aggregate expenditure line upward.
Why do imports usually exceed exports?
Because, as a nation, we are able to spend more than we produce using increased overall debt. In order to export more than you import, you have to save money, that is, spend less than you produce.
Y1/IB 23) Net Exports and Aggregate Demand
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Which of the following best describes a benefit of export prices exceeding import prices?
Which of the following best describes a benefit of export prices exceeding import prices? It provides quality review services.
When a country exports more than it imports quizlet?
If a country exports more than it imports is has a trade surplus. When a country imports more than it exports it’s considered a trade deficit.
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