Aggregate Expenditure Model

Net Exports

Contributors
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Christian Bien

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What is Net Exports?
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Net exports is defined as the total value of exports take away the total value of imports. Value considers both the volume and price of exports and imports. - Exports - money flowed into Australia from overseas in exchange for goods or services. For example, the export of iron ore to China. - Imports - money flowed out from Australia to overseas in exchange for goods or services. For example, the import of a Japanese made Toyota vehicle into Australia.

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What are the Factors of Net Exports?
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The factors of Net Exports are an abbreviation known as BOX-TT. - Position of the Business Cycle - High domestic economic activity such as an upswing or boom phase will encourage larger imports into Australia - Positive of the Overseas Business Cycle - High economic activity from Australia's trading partners will encourage more demand for Australia's exports. - Exchange Rate - The exchange rate determines the competitiveness of Australia's exports and imports. (more can be found in the Unit 3 Section) 1) Appreciation - positions exports as more expensive for overseas buyers and hence, less internationally competitive while simultaneously making imports cheaper and more competitive, resulting in a decrease of net exports. 2) Depreciation - positions exports as less expensive for overseas buyers and hence, more internationally competitive while simultaneously making imports more expensive and less competitive, resulting in an increase of net exports. - Terms of Trade - measures a ratio of export prices to import prices. An increase in Terms of Trade will increase net exports as it means export prices are greater relative to imports and vice versa. - Tariffs and other protectionist measures - Protectionism decreases imports and hence, increases net exports

Topic Menu
Consumption
Consumption Function
MPC, MPS, APC and APS
Investment
Government Expenditure
Net Exports
Aggregate Expenditure Model
Multiplier Process

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