Exports will increase if foreign: income, preferences for U.S. goods, or prices of substitute goods increase. Imports will increase if U.S.: incomes, preferences for foreign goods, or prices of substitute goods increase. In other words, changes in net exports follow the law of supply and demand. If prices of substitute goods abroad rise, U.S. goods will become more attractive to everyone. Exports will rise and imports will fall. If prices of substitute goods rise in the U.S., then exports will fall and imports will increase for the same reasons.…
