Key Diagrams - Trade and AD-AS Diagrams

Aspects of the macroeconomic impact of trade can also be analysed using AD-AS diagrams. This short video explores some of these.

You can use aggregate demand and aggregate supply curve analysis to help explain some of the macroeconomic effects of changes in trade. Good examples include the export multiplier trade effect, the impact of cheaper imports and also the possible effect on LRAS of the ability to import capital inputs at a lower price and when inward FDI flows in to create extra productive capacity.