Unit 3 → Subtopic 3.3
Exports & Imports: The Net Exports’ Impact on AD
Net exports (X - M), the difference between a country’s total exports and total imports, is a key component of Aggregate Demand (AD). When a country exports more than it imports, it has a trade surplus, which contributes positively to AD and economic growth. Conversely, when imports exceed exports, it results in a trade deficit, which can reduce national income and slow economic expansion. Understanding how international trade affects AD is crucial for analyzing a nation’s economic performance, currency value, and overall global competitiveness. This project challenges students to examine how exports and imports influence Aggregate Demand and economic stability, exploring the role of trade balances in shaping national economies.
Students will begin by researching how net exports fit into the AD equation (AD = C + I + G + (X - M)) and how fluctuations in international trade impact economic growth. They should explore how factors such as currency exchange rates, trade agreements, tariffs, global demand, and domestic production costs influence a country's trade balance.
A key focus of this project is analyzing real-world examples of trade imbalances. Students should research countries with strong export-driven economies (such as China and Germany) and compare them with nations that rely heavily on imports (such as the United States). They should examine how trade surpluses contribute to national wealth and industrial growth, while trade deficits can lead to foreign debt accumulation and economic vulnerabilities. Additionally, students should investigate how government policies such as tariffs, subsidies, and trade restrictions affect net exports and, in turn, Aggregate Demand.
Students will then write a short report analyzing the role of net exports in shaping a country's economic health, discussing trade balance trends, government interventions, and the global economic implications of trade surpluses and deficits. The goal of this project is for students to understand the significance of international trade in macroeconomics and how economic policies influence global competitiveness.
Recommended Procedure:
Research the Role of Net Exports in Aggregate Demand – Understand how export revenue boosts national income, while heavy reliance on imports can lead to economic imbalances.
Analyze Factors That Influence Trade Balances – Investigate how currency value, global demand, tariffs, and trade agreements impact net exports.
Compare Case Studies of Export-Driven vs. Import-Dependent Economies – Examine countries such as China (export surplus) and the U.S. (trade deficit) to explore how their trade balances affect economic growth.
Evaluate the Impact of Government Trade Policies – Research how tariffs, subsidies, and trade agreements affect a country’s ability to compete in international markets.
Write a Short Report on the Role of Net Exports in AD – Present findings in a structured format, explaining how trade balances impact economic stability and growth potential.
Suggested Sources:
Understanding Net Exports and Trade Balances:
Investopedia: How Trade Surpluses and Deficits Affect an Economy – https://www.investopedia.com
Khan Academy: The Role of Exports and Imports in Aggregate Demand – https://www.khanacademy.org
2. Case Studies on Trade Surpluses and Deficits:
The Balance: Why Some Countries Have a Trade Deficit and Others a Surplus – https://www.thebalancemoney.com
Harvard Business Review: How Trade Imbalances Affect Global Economies – https://hbr.org
3. Government Policies and Trade Regulations:
World Bank: The Impact of Tariffs on Trade Balances – https://www.worldbank.org
OECD: How Trade Agreements Influence Economic Growth – https://www.oecd.org
4. International Trade and Macroeconomic Stability:
IMF: Case Studies on the Effects of Global Trade Imbalances – https://www.imf.org
United Nations: The Role of Globalization in Trade Balances – https://www.un.org
Grading Rubric:
Total Points: __ /20
