Which of the following factors is least likely to stimulate an increase in net export demand?

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To determine which factor is least likely to stimulate an increase in net export demand, let's evaluate how each option would influence NX (exports minus imports).
Option a: A severe recession experienced by a major trading partner. When a partner economy shrinks, its demand for imports from other countries typically falls, reducing the foreign buyers for domestic goods. This tends to decrease, not increase, net export demand, making it the least likely to stimulate NX growth.
Option b: A substantial depreciation of the domestic currency. A weaker domestic currency makes domestic goods cheaper for foreign buyers and foreign goods more expensive for domestic consumers. This tends to raise exports and/or reduce imports, boosting net export demand.
Option c: A significant improvement in the quality and competitiveness of domestic goods, driven by innovation and efficiency. Higher quality and better competitiveness make domestic goods more attractive abroad, increasing exports and improving NX, assuming foreign demand responds positively.
Option d: A notable reduction in trade barriers, such as tariffs, increasing access to foreign markets. Lower trade barriers typically expand export opportunities, expand foreign demand for domestic products, and boost net exports.
In summary, options b, c, and d all have mechanisms to raise net export demand, whereas option a suppresses it by weakening foreign demand for the country's exports. Therefore, option a is the one least likely to stimulate an increase in net export demand.

MUF0062 Economics Unit 2 - Semester 2, 2025

Which of the following factors is least likely to stimulate an increase in net export demand?

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