What are the determinants of net exports?
Net exports are exports minus imports. The determinants of net exports are foreign and domestic income, tastes, trade restrictions, and exchange rates. Net exports are a positive function of foreign income, tastes that favor exports, favorable changes in government restrictions on trade, and depreciation of the domestic currency. Net exports are negatively related to domestic income, tastes that favor imports, unfavorable changes in government restrictions on trade, and appreciation of the domestic currency. • What is the aggregate expenditures function? The aggregate expenditures function is the sum of the spending components in the economy: consumption plus investment plus government spending plus net exports. AE = C + I + G + X The aggregate expenditures function has a flatter (smaller) slope than C + I + G because the net exports function has a negative slope.
