Export spending is Independent of income while import spending is dependent on income. IM = autonomous IM + induced IM
Marginal Propensity to Import (MPM) is the change in imports from a corresponding change in income. As our income goes up, we spend more on imported goods.
Stephanie Powers "Aggregate Demand"
Exports are autonomous because it doesn't depend on our income it depends on other countries income
Imports are both autonomous and induced because you will always have to bring in necessities even if your income is 0 and when income increases the amount of imports increase Imports> exports- Trade deficit Imports< exports- Trade surplus
Marginal propensity to import is the slope of the import function. if IM= 40+0.1Y then 0.1 is the MPIM. it tells us that for every additional dollar of income we spend .1 on imports.
Net exports= x-im x= 100 - IM= 40-.1y net exports=60-.1Y
Determinants of Net export
prices of goods in other countries goes up- exports go up and imports go down, this makes x-im go up
value of Canadian dollar appreciates- exports go down, imports go up, x-im goes down
price of goods in Canada go up- exports go down, imports go up, x-im goes down
foreign income increases- exports go up, imports stay the same, x-im increases
people like Canadian products more- exports go up, imports stay the same, x-im increases
Dr. Stephanie Powers, "Aggregate Demand", Intro to Macroeconomics.(Lecture, Donald School of Business, Red Deer Alberta, Winter 2012)
Net Export Spending = Export Spending (X) - Import Spending (IM)
Export spending is Independent of income while import spending is dependent on income. IM = autonomous IM + induced IM
Marginal Propensity to Import (MPM) is the change in imports from a corresponding change in income. As our income goes up, we spend more on imported goods.
Stephanie Powers "Aggregate Demand"
Exports are autonomous because it doesn't depend on our income it depends on other countries income
Imports are both autonomous and induced because you will always have to bring in necessities even if your income is 0 and when income increases the amount of imports increase
Imports> exports- Trade deficit
Imports< exports- Trade surplus
Marginal propensity to import is the slope of the import function. if IM= 40+0.1Y then 0.1 is the MPIM. it tells us that for every additional dollar of income we spend .1 on imports.
Net exports= x-im
x= 100
-
IM= 40-.1y
net exports=60-.1Y
Determinants of Net export
Dr. Stephanie Powers, "Aggregate Demand", Intro to Macroeconomics.(Lecture, Donald School of Business, Red Deer Alberta, Winter 2012)