[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

The effect of exports and imports on aggregate expenditures is straightforward.
Recall that what we are concerned with here is total purchases of domestically produced
output. Consequently, exports of U.S.-produced goods to other countries represent
another component of aggregate expenditures, just like consumption,
investment, and government expenditures. However, some of what households,
firms, and the government purchase are goods made abroad. To calculate the total
demand for domestically produced goods, we must subtract the value of imports
from the total. The net effect of international trade on aggregate expenditures is
measured then by exports minus imports, or net exports. Exports minus imports are
also sometimes referred to as the balance of trade.
Figure 30.8 shows net exports as a percentage of GDP for the United States.
Since the mid-1970s, U.S. imports have exceeded U.S. exports, making net exports
negative. Chapter 26, from the long-run perspective of the full-employment model,
discussed how net exports were affected by the U.S. investment boom in the late
1990s and the large increases in the federal budget deficit in recent years. Our focus
in the current chapter is on the short run, so just as we did when discussing the
other components of aggregate expenditures, we need to ask whether net exports
depend on income (and if so, how), and we need to ask what factors might shift net
exports at each level of income.
2
1
Net exports
0
PERCENTAGE OF GDP
–1
–2
–3
–4
–5
1960 1965 1970 1975 1980 1985 1990 1995 2000
Figure 30.8
NET EXPORTS AS A
PERCENTAGE OF GDP
In the 1980s, U.S. net exports deteriorated because of falling national saving due to the
federal budget deficit (see Chapters 7 and 8). During the past several years, strong
growth in U.S. incomes, recessions in many countries we trade with, and a burgeoning
federal budget deficit have caused net exports to fall dramatically.
SOURCE: Economic Report of the President (2004).
NET EXPORTS ∂ 677