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Net Exports Function
Calculating a Country's Trade Balance
Based on the economic data provided for Country A, calculate its current trade balance (the value of its exports minus the value of its imports). Then, determine the new trade balance if the country's total income were to increase by $200 billion.
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Consider an economy where the total value of goods and services sold to other countries remains fixed. If this economy experiences a significant increase in its overall income, what is the direct and most likely effect on its trade balance (the value of its exports minus the value of its imports)?
Calculating a Country's Trade Balance
Relationship Between National Income and Net Exports
In an economy where the total value of goods and services sold to other countries is held constant, a decrease in the fraction of income that is spent on imported goods will, all else being equal, cause the country's trade balance (exports minus imports) to worsen (decrease).