Net Exports Line

A representative net exports line is presented in the exhibit to the right. This red line, labeled X-M in the exhibit, is negatively sloped, indicating that greater levels of income generate greater net exports by the foreign sector. This negative relation indicates that imports, which are subtracted from exports to derived net exports, are induced by an expanding economy.

The net exports line graphically illustrates the net exports-income relation for the foreign sector, which is then added to the consumption line to derive the aggregate expenditures line used in Keynesian economics to identify equilibrium income and production.

The intercept of the net exports line indicates the intersection point between the net exports line and the vertical net exports axis. The net exports line intersects the vertical axis at a value of $1 trillion. Theoretically, this is a minimum "baseline" level of net exports, the amount of net exports undertaken if aggregate income falls to zero. It generally includes both autonomous exports and autonomous imports. This intersection indicates autonomous net exports--net exports unrelated to income. Click the [Intercept] button to illustrate.

Autonomous net exports are net exports by the foreign sector that are unrelated to and unaffected by the level of income or production. This is best indicated by a zero level of income. For the aggregate economy autonomous net exports are mostly an unlikely theoretical extrapolation.