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- Net exports: The difference between exports and imports for a country as a result of trade.
- NX = X – M
- Where NX = net exports, X = exports, M = imports.
- Exports (X) are the total amount of goods and services produced in the home country that are bought by foreigners.
- Imports (M) are the total amount of goods and services consumed in the home country that are bought from foreigners.
- When a country exports more than it imports it has a trade surplus.
- When a country imports more than it exports it has a trade deficit.
- Net exports are sensitive to changes in the exchange rate.
- As the exchange rate appreciates imports rise and exports fall, so net exports fall.
- As the exchange rate depreciates imports fall and exports rise, so net exports rise.
- Net exports play an important role in GDP and the aggregate demand