Answer to Question #222954 in Macroeconomics for katrichie

Question

(a) State the determinants of export and clearly explain how each of the determinants affects the level of imports. (6)

(b) Using illustrative diagrams explain how an increase in foreign government spending affects output and trade balance. (14)

Answer 1

There are 6 different determinants when it comes toexport that need to be considered. They include domestic demand, where the country exporting respective product needs to ensure that the country that is importing is in demand of the product. The local market characteristics need to be viewed in terms of customers' consumption. Similarly, It is important to consider the infrastructure's quality so as to determine ways to increase supply within the specific market. The environment of the exporter also needs to be conducive to allow the ideal processes.

When the spending of the government increases, the output increases and trade deficits arise as a result.