net exports

(noun)

The difference between the monetary value of exports and imports.

Related Terms

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).

  • 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.

  • Impacts of Policies and Events on Equilibrium

    • When the U.S. chose to support Israel during the Yom Kippur War, the Organization of Arab Petroleum Exporting Countries (OAPEC) responded with an oil embargo, which increased the market price of a barrel of oil by 400%.
    • An increase in the exchange rate has the effect of increasing imports and decreasing exports, since domestic goods are relatively more expensive.
    • A decrease in net exports leads to a decrease in aggregate demand, since net exports is one of the components of aggregate demand.
    • By implementing protectionism policies such as tariffs and quotas, a government can make foreign goods relatively more expensive and domestic goods relatively cheaper, increasing net exports and therefore aggregate demand.
    • Net exports rise as a component of aggregate demand.

  • 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.

  • Long-Run Implications of Fiscal Policy

    • Expansionary fiscal policy can lead to decreased private investment, decreased net imports, and increased inflation.
    • Some also believe that expansionary fiscal policy also decreases net exports, which has a mitigating effect on national output and income.
    • Consequently, exports decrease and imports increase.

  • Introducing Aggregate Demand

    • Net Export (NX):This can be put simply as the sale of goods to foreign countries subtracted by the purchase of goods from other countries (X-M).
    • Trade surpluses and deficits can occur based on whether or not exports or imports are higher.
    • From a quantitative perspective this is simply expressed as: Spending = Income + Net Increase in Debt.
    • The aggregate demand curve is derived via the consumption, investment, government spending, and net export.

  • 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.

  • Defining GDP

    • GDP identified as "Y" in equation form, include Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M).
    • "X" (exports) represents gross exports.
    • GDP captures the amount a country produces, including goods and services produced for other nations' consumption, therefore exports are added.
    • Depreciation (or Capital Consumption Allowance) is added to get from net domestic product to gross domestic product.

  • 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.