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PERFECT COMPETITION AND DEMAND: The demand curve for the output produced by a perfectly competitive firm is perfectly elastic at the going market price. The firm can sell all of the output that it wants at this price because it is a relatively small part of the market. As a price taker, the firm has no ability to charge a higher price and no reason to charge a lower one. The market price facing a perfectly competitive firm is also the firm's average revenue and, most importantly, its marginal revenue.

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AUTONOMOUS EXPORTS:

Exports to the foreign sector that do not depend on domestic income or production (especially national income or gross domestic product). Exports depend on foreign income or production, but not on domestic income or production. While other expenditures have both autonomous and induced components, exports are exclusively autonomous. Autonomous exports are a key part of the autonomous part of net exports. Induced net exports are due to induced imports.
Autonomous exports are exports to the foreign sector that are unrelated to and unaffected by the level of domestic income or production. As one of the two components of net exports, autonomous exports contribute to autonomous net exports. The contrast to autonomous exports are induced imports, goods purchased from the foreign sector by the domestic economic which are dependent on domestic income or production. Induced imports lead to induced net exports.

While autonomous exports are unaffected by domestic income or production and are held constant for the construction of the exports line, they are not absolutely constant, they do change. Autonomous exports are affected by an assortment of factors and influences--determinants--such as foreign currency exchange rates, global economic conditions, and trade policies. Changes in these determinants cause changes in autonomous exports, which shift the exports line, the net exports line, and the aggregate expenditures line.

Exports Minus Imports

Net exports are the difference between exports and imports, or exports minus imports. Exports are goods produced by the domestic economy and purchased by the foreign sector. Imports are goods produced by the foreign sector and purchased by the domestic economy (that is, the domestic household, business, and government sectors).

The amount of exports sold to the foreign sector is theoretically and realistically unaffected by the level of domestic income or production. That is, exports are totally autonomous. They are affected by what transpires in the foreign sector not in the domestic economy. For example, an increase in U.S. national income is NOT going to induce a change in exports.

In contrast the amount of imports purchased from the foreign sector is induced by the level of domestic income and production, as well as an autonomous component. As such, autonomous exports is the combination of autonomous exports and autonomous imports. Or better yet, autonomous exports minus autonomous imports.

Autonomous: A Line

Exports Line
Exports Line
The best way to illustrate autonomous exports is with a exports line, such as the one presented in the exhibit to the right. The red line, labeled X in the exhibit, indicates exports, domestic production purchased the foreign sector. The vertical intercept of this line indicates autonomous exports.

Because exports depend on activity in the foreign sector and not the domestic economy, exports are autonomous--completely and totally. Hence the exports line is horizontal, with a zero slope. Autonomous exports are equal to $1 trillion at every level of domestic income and production.

Determinants

Autonomous exports, like other autonomous expenditures, are important to Keynesian economics not because they are unaffected by income, but because the ARE affected by a host of nonincome factors. For exports, some of these other factors are foreign currency exchange rates, global economic conditions, and foreign trade policies.

These determinants, similar to those for other relations in the study of economics, cause a change in autonomous exports. From a graphical perspective, these determinants cause the exports line to shift, which effectively means that the intercept of this line changes.

Three of the more important exports determinants are:

  • Exchange Rates: Currency exchange rates are the prices of one currency in terms of other currencies. For example, one U.S. dollar might be able to purchase 100 Japenese yen, giving a currency exchange rate of one hundred yen per dollar. Changes in currency exchange rates affect the ultimate purchasing price of imports and exports. Should one dollar purchase more Japanese yen, then the price of U.S. exports to Japan effectively increases, with would decrease exports to Japan. The end result is a decrease in autonomous exports.

  • Global Economic Conditions: While exports are autonomous with respect to domestic income and production, they tend to be induced by foreign sector income and production. To the extent that the global economy is prosperous, with expanding income, exports to the foreign sector are bound to increase. These exports are induced by foreign sector income, but autonomous for domestic sector income and production.

  • Trade Policies: Governments, both the domestic government and those in the foreign sector, are inclined to undertake policies that affect foreign trade--exports and imports. Most nations seek to promote their exports while restricting imports. To the extent that these domestic policies are successful, autonomous exports increase. However, to the extent that similar trade policies in other countries, then autonomous exports are bound to decrease.

Other Autonomous Expenditures

Exports are part of net exports, one of four expenditures on aggregate production in the macroeconomy. The other three--consumption expenditures, investment expenditures, and government purchases--also have important autonomous components. While autonomous exports can be a source of business-cycle instability, the autonomous components of these other expenditures (especially investment) are generally more important in Keynesian economics.
  • Autonomous consumption is key factor in the analysis of business-cycle instability in large part because consumption is the largest of the four expenditures. While business cycle ups and downs are usually attributable to investment, more than a few can be traced back to autonomous changes in consumption expenditures. While these autonomous expenditures are unrelated to income, they are influenced by other factors, such as interest rates, consumer confidence, and wealth.

  • Autonomous investment is key factor in the analysis of business-cycle instability. Business cycle ups and downs can often be traced back to autonomous changes in investment expenditures by the business sector. While these autonomous expenditures are unrelated to income, they are influenced by other factors, such as interest rates, technology, expectations, and wealth.

  • Although some degree of government purchases are induced by income, the government sector is also inclined to change spending in response to factors other than income. Autonomous government purchases result from these other influences and are perhaps most important in the analysis of fiscal policy designed to correct business cycle ups and downs.

<= AUTONOMOUS EXPENDITURESAUTONOMOUS GOVERNMENT PURCHASES =>


Recommended Citation:

AUTONOMOUS EXPORTS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: June 19, 2018].


Check Out These Related Terms...

     | induced imports | exports line | autonomous net exports | induced net exports | marginal propensity to import | autonomous consumption expenditures | autonomous investment expenditures | autonomous government purchases | intercept, net exports line | slope, net exports line | injections | leakages | induced expenditures |


Or For A Little Background...

     | Keynesian economics | circular flow | aggregate expenditures | net exports | exports | imports | net exports of goods and services | macroeconomics | foreign sector | national income | gross domestic product | business cycles | determinants |


And For Further Study...

     | aggregate expenditures | aggregate expenditures line | net exports determinants | Keynesian model | Keynesian equilibrium | injections-leakages model | aggregate demand | paradox of thrift | fiscal policy | multiplier |


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