Unit 2 Macro: Can Exports Drive a Recovery?

UK overseas trade is in the news today with the release of a batch of figures showing a record level of UK exports - see BBC news - UK trade deficit cut by higher exports

Exports represent an injection of demand into the circular flow of income and spending, and if a sufficiently large rise in the volume of goods and services sold overseas can be sustained, this will help maintain aggregate demand at a time when private sector consumption is likely to remain very weak. There might also be positive multiplier effects from a more vibrant export sector and possible accelerator effects if increased demand provides an incentive for export businesses to increase their planned capital spending.

Evan Davis has written extensively about the ever changing landscape of competitive advantage in the world economy and the need for the British economy to rebalance and shift resources in industries where value added is high and where the income elasticity of demand going forward is likely to be strongly positive. For those who missed the original series, there are some tremendous resources available through a special section of the Open University web site. Click here to access the resources.