CHAPTER 52
Exports and Imports
LEARNING OBJECTIVES
Explain the relationship of positive or negative net exports and aggregate demand.
Describe why the trade deficit rises further in economic expansions but declines in –
contractions.
OUTLINE OF CHAPTER
I. International Trade: Exports and Imports
II. Actual Trends in Exports and Imports
KEY TERMS
exports
what a country sells to foreigners
imports
what a country buys from foreigners
net exports
when imports exceed exports
exports are greater than imports
ANSWERS TO END OF CHAPTER REVIEW QUESTIONS
Explain the relationship of positive or negative net exports and aggregate demand.
1. How does the usual pattern of American trade over the cycle tend to reduce demand for
American products?
Imports rise during an expansion. The increase in dollars flowing out of American
2. How does a trade surplus affect aggregate expenditures? Explain. How does a trade
deficit affect aggregate expenditures? Explain.
A trade deficit means larger amounts of money flowing out of the US economy to pay for
Describe why the trade deficit rises further in economic expansions but declines in –
contractions.
3. Describe why the trade deficit rises further in economic expansions but declines in
contractions.
The trade deficit rises during economic expansions because Americans have more money
4. How does the high price of raw materials in an expansion hurt the American economy?
If a firm is unable to raise the price of the finished good, rising prices of imported raw