If Other Factors Are Equal, What Effect Will an Increase in an Economy's Exports Have?


Quick Answer

If all other factors are equal, it is thought that an increase in an economy's exports will also increase the GDP or gross domestic product. GDP measures the size of an economy and therefore an increase represents overall economic growth.

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Full Answer

This theory has been used to develop ELG or "export led growth," a means of strengthening the economies of developing nations by using exports. However, while some studies have found a causal link between increased exports and increased growth, others have not established such a link. In reality, all other factors are virtually never equal and as such, exports alone cannot be relied upon as a means of economic growth.

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