Question

Identify 2 factors that determine export revenue

Answer 1

1. Exchange rate: A depreciation of the currency will likely to increase the export revenue of the country, depreciation means a decrease in the value of home currency so it makes cheap the home products in foreign currency so the foreigners increase the demand for the home goods and services. The opposite is true for an appreciation, an appreciation makes the exports more expensive and the imports less expensive and there should be a decrease in the export revenue.

2. Foreign income: The foreign income is an important determinant of the export revenue, if there is an increase in the foreign GDP so they demand more goods and services and it leads to an increase the exports for the home country.