Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Net Exports

What it is:

Net exports are the difference between a country's total value of exports and total value of imports. Depending on whether a country imports more goods or exports more goods, net exports can be a positive or negative value.

How it works (Example):

Net exports are measured by comparing the value of the goods imported over a specific time period to the value of similar goods exported during that period. The formula for net exports is:

Net Exports = Value of Exports - Value of Imports

For example, let's suppose Canada purchased $3 billion of gasoline from other countries last year, but it also sold $7 billion of gasoline to other countries last year. Using the formula above, Canada's net gasoline exports are:

Net Exports = $7 billion - $3 billion = $4 billion

Why it Matters:

Net exports is an important variable used in the calculation of a country's GDP. When the value of goods exported is higher than the value of goods imported, the country is said to have a positive balance of trade for the period. When taken as a whole, this in turn can be an indicator of a country's savings rate, future exchange rates, and to some degree its self-sufficiency (though economists constantly debate the idea).

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