Discuss the major determinants of net exports

Answer 1

National incomes: Although both exports and imports depend on many factors, the predominant one is income levels in different countries. When our economy grows faster than the economies of our trading partners, our net exports tend to shrink. Conversely, when foreign economies grow faster than ours, our net exports tend to rise.

Relative prices and exchange rates: A rise in the prices of a country's goods will lead to a reduction in that country's net exports. Analogously, a decline in the prices of a country's goods will raise that country's net exports. Similarly, price increases abroad raise the home country's net exports, whereas price decreases abroad have the opposite effect.