The Effect of Trade Balance on National Income Growth Essay Example for Free

The Effect of Trade Balance on National Income Growth Essay Every country wants to be Just an exporter of goods and services. But since no man is an island, no matter how much exports a country makes, it still has to import at some point. Using the national income identity, Y = National income or GDP C = Consumption I = gross investment G = Government expenditure X = Exports and, M = Imports. From the equation above, the GDP of a country is dependent on consumption, investment, government spending and net exports. Other variables apart, this paper focuses on how exports and imports affect the GDP. Having a high GDP is the aim of every nation but having the right mix of exports and imports is the problem. Some countries live beyond their means by importing more than they export while some export more than they import.