EconPapers    
Economics at your fingertips  
 

Economic Expansion and The Balance of Trade: The Role of Aggregate Demand Elasticity

Ben L. Kyer and Gary E. Maggs

The American Economist, 2014, vol. 59, issue 2, 176-181

Abstract: This paper investigates the role of aggregate demand elasticity for the balance of trade when economic expansion occurs. We have two conclusions. First, when an economic expansion results from an increase of aggregate demand, the balance of trade deficit is larger the less elastic is aggregate demand with respect to the general price level. Second, when an economic expansion happens from an increase of short-run aggregate supply, the price level elasticity of aggregate demand determines both the direction of change of the balance of trade and the size of the resulting deficit or surplus. We show here that a relatively elastic aggregate demand can result in a balance of trade deficit, while a relatively inelastic aggregate demand can yield a balance of trade surplus.

Keywords: balance of trade; aggregate demand; aggregate supply; price level elasticity (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/056943451405900208 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:amerec:v:59:y:2014:i:2:p:176-181

DOI: 10.1177/056943451405900208

Access Statistics for this article

More articles in The American Economist from Sage Publications
Bibliographic data for series maintained by SAGE Publications ().

 
Page updated 2020-06-17
Handle: RePEc:sae:amerec:v:59:y:2014:i:2:p:176-181