IDEAS home Printed from https://ideas.repec.org/a/sae/amerec/v59y2014i2p176-181.html
   My bibliography  Save this article

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

Author

Listed:
  • Ben L. Kyer
  • Gary E. Maggs

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.

Suggested Citation

  • Ben L. Kyer & Gary E. Maggs, 2014. "Economic Expansion and The Balance of Trade: The Role of Aggregate Demand Elasticity," The American Economist, Sage Publications, vol. 59(2), pages 176-181, November.
    • Handle: RePEc:sae:amerec:v:59:y:2014:i:2:p:176-181
    DOI: 10.1177/056943451405900208
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/056943451405900208
    Download Restriction: no
    File URL: https://libkey.io/10.1177/056943451405900208?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Gambs, Carl M, 1974. "A Note on Macroeconomic Textbooks: The Use of The Aggregate Demand Curve," Journal of Economic Literature, American Economic Association, vol. 12(3), pages 896-898, September.
    2. Kyer, Ben L. & Maggs, Gary E., 1992. "On the Keynes and Pigou effects in aggregate demand theory," Journal of Macroeconomics, Elsevier, vol. 14(2), pages 371-375.
    3. Havrilesky, Thomas M, 1975. "A Comment on "The Use of the Aggregate Demand Curve."," Journal of Economic Literature, American Economic Association, vol. 13(2), pages 472-473, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nicholas Apergis & Sophia Eleftheriou, 2000. "Measuring Price Elasticity of Aggregate Demand in Greece: 1961-1995," Public Finance Review, , vol. 28(5), pages 452-467, September.
    2. Ben L. Kyer & Gary E. Maggs, 1996. "Supply-Side Economics and the Price Level Elasticity of Aggregate Demand," Public Finance Review, , vol. 24(1), pages 88-98, January.
    3. Ben L. Kyer & Gary E. Maggs, 2004. "Implications Of Aggregate Demand Elasticity For The Phillips Curve," New York Economic Review, New York State Economics Association (NYSEA), vol. 35(1), pages 69-76.
    4. Ben Kyer & Gary Maggs, 2009. "On Indexed Bonds and Aggregate Demand Elasticity," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 17-21, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:amerec:v:59:y:2014:i:2:p:176-181. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://journals.sagepub.com/home/aex .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.