Macroeconomics 1.4.docx - Macroeconomics 1.4 The Goods...

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Macroeconomics 1.4 The Goods Market in an Open Economy Exports and Imports - UK economy has become more open over time o I + M = 20% of GDP in 1948 o I + M = 30% of GDP now (29% M and 32% I) Since 1948 imports and exports have increased by around 10% pts Broadly followed same upward trend but have diverged for long periods of time sustained trade surpluses/trade deficits M = M (Y, E) X = X (Y * , E) o E = Real exchange rate o * = Foreign (as export relies on other people’s income) - Main differences between people’s export ratios are geography and country size: o Distance from other markets o Size also matters: The smaller the country, the more it must specialise in producing
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