2.2.5 - Net Trade (X-M)

Question 1

Influences on net trade balance

Answer 1

• real income
• exchange rates
• state of the world economy
• degree of protectionism e.g use of tariffs or quotas
• non-price factors e.g product quality

Question 2

Trade surplus

Answer 2

Value of exports is greater than value of imports

Question 3

Trade deficit

Answer 3

Value of imports greater than value of exports

Question 4

What happens to net trade if the value of the pound depreciates

Answer 4

• imports more expensive
• lower quantity of imports/higher quantity of exports
• AD rises