Net exports
Also called: NX · Topic: Balance of Payments and Exchange Rates · NCERT: Class 12, Ch 2 "National Income Accounting"; Class 12, Ch 6 "Open Economy Macroeconomics"
Meaning
Net exports are exports minus imports: NX = X − M. Positive net exports mean a trade surplus. Negative net exports mean a trade deficit. In national income accounting, net exports are the external part of aggregate demand: Y = C + I + G + NX. They cover both goods and services.
Example
In the NCERT exercise with X = 90 and M = 50 + 0.05Y, equilibrium income is 560. Imports are 50 + 28 = 78, so NX = 90 − 78 = 12, which is a trade surplus. If government spending rises to 50, income rises to 600, imports rise, and NX falls to 10.
Don't confuse with
- Current account balance: this adds net income and transfers (for example, remittances) to trade in goods and services. It is broader than net exports.
- Balance of trade: in BoP tables, this is goods exports minus goods imports only, with services left out.
Related concepts
- Open economy
- Closed economy
- External sector
- Export
- Import
- Demand for domestic goods
- Marginal propensity to import
- Autonomous imports