net exports

Examples of net exports in the following topics:

• GDP Equation in Depth (C+I+G+X)

  • GDP is the sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M): Y = C + I + G + (X - M).
  • GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M):
  • Exports (X) represents gross exports.
  • GDP captures the amount a country produces, including goods and services produced for other nations' consumption, therefore exports are added.
  • Sometimes, net exports is simply written as NX, but is the same thing as X-M.

• Defining Aggregate Expenditure: Components and Comparison to GDP

  • Written out the equation is: aggregate expenditure equals the sum of the household consumption (C), investments (I), government spending (G), and net exports (NX).

• Absolute Advantage and the Balance of Trade

  • In the drive for international trade, it is important to understand how trade affects countries positively and negatively—both how a country's imports and exports affect its economy and how effectively the country's ability to create and export vital goods effects the businesses within that country.
  • The balance of trade (or net exports, sometimes symbolized as NX) is the difference between the monetary value of exports and imports in an economy over a certain period.
  • A positive balance is known as a trade surplus if it consists of exporting more than is imported; a negative balance is referred to as a trade deficit or, informally, a trade gap.
  • The European Free Trade Agreement has helped countries international trade without worrying about absolute advantage and increases net exports.

• The Balance of Trade

  • It is measured by finding the country's net exports.
  • Y represents national income or GDP, C is consumption, I is investment, G is government spending, and NX stands for net exports (exports minus imports).
  • Assuming that the economy is at potential output (meaning Y is fixed), if the budget deficit increases and savings and investment remain the same, then net exports must fall, causing a trade deficit.
  • In the U.S., net borrowing has tended to have a direct relationship with net imports.
  • The red line represents net imports, which is equivalent to the negative balance of trade, and the black line represents net borrowing, which is equivalent to the government budget deficit.

• The Current Account

  • The current account represents the sum of net exports, factor income, and cash transfers.
  • The current account represents the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors), and cash transfers.
  • Because the trade balance is typically the largest component of the current account, a current account surplus is usually associated with positive net exports.
  • The net factor income records a country's inflow of income and outflow of payments.
  • Where CA is the current account, X and M and the export and import of goods and services respectively, NY is net income from abroad, and NCT is the net current transfers.

• The Circular Flow and GDP

  • In economics, the "circular flow" diagram is a simple explanatory tool of how the major elements as defined by the equation Y = Consumption + Investment + Government Spending + (Exports - Imports). interact with one another.
  • Finally, exports minus imports, X - M, references whether an economy is a net importer or exporter (or potentially trade neutral (X - M = 0)) and the impact of this component on overall GDP.
  • Note that if the country is a net importer the value of X - M will be negative and will have a downward impact to overall GDP; if the country is a net exporter, the opposite will be true.

• Balance of Trade

  • The balance of trade is the difference between the monetary value of exports and imports in an economy over a certain period.
  • The balance of trade (or net exports, sometimes symbolized as NX) is the difference between the monetary value of exports and imports of output in an economy over a certain period.
  • It is the relationship between a nation's imports and exports.
  • The cost of production (land, labor, capital, taxes, incentives, etc.) in the exporting economy vis-à-vis those in the importing economy
  • In export-led growth (such as oil and early industrial goods), the balance of trade will improve during an economic expansion.

• Costs of Trade

  • Free trade is a policy where governments do not discriminate against imports and exports; creates a large net gain for society.
  • Free trade is beneficial to society because it eliminates import and export tariffs.
  • Free trade policies consist of eliminating export tariffs, import quotas, and export quotas; all of which cause more losses than benefits for a country.
  • With free trade in place, the producers of the exported good in exporting countries and the consumers in importing countries all benefit.
  • Free trade does not have tariffs and results in net gain for society.

• The Argument for Barriers

  • In the process, the economy's composition of employment changes; but, according to economic theory, there is no net loss of jobs due to trade.
  • In that context, economists argue that easing adjustment of those harmed is economically more fruitful than protection given the net economic benefit of trade to the total economy.
  • But it is also true that workers in export industries benefit from trade.
  • Controlling such exports is clearly justified from a national security standpoint; but, it does come at the cost of lost export sales and an economic loss to the nation.
  • KITA attempts to protect South Korean producers while finding international export markets.

• Exporting

  • Firms may choose to export products for several reasons.
  • A firm can export its products in one of three ways: indirect exporting, semi-direct exporting, and direct exporting.
  • Indirect exporting is a common practice among firms that are just beginning their exporting.
  • Such semi-direct exporting can be handled in a variety of ways: (a) a combination export manager, a domestic agent intermediary that acts as an exporting department for several noncompeting firms; (b) the manufacturer's export agent (MEA) operates very much like a manufacturer's agent in domestic marketing settings; (c) a Webb-Pomerene Export Association may choose to limit cooperation to advertising, or it may handle the exporting of the products of the association's members and; (d) piggyback exporting, in which one manufacturer (carrier) that has export facilities and overseas channels of distribution handles the exporting of another firm (rider) noncompeting but complementary products.
  • The exporting manufacturer conducts market research, establishes physical distribution, and obtains all necessary export documentation.