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Chapter 23: Problem 6

The GDP for the United States is \(\$ 18,036\) billion and its current account balance is \(-\$ 484\) billion. What percent of GDP is the current account balance?

Short Answer

Expert verified
The current account balance represents approximately \(2.68\%\) of the GDP for the United States.

Step by step solution

01

Write down the given values

The GDP for the United States is given as \(18,036\) billion, and its current account balance is given as \(-484\) billion.
02

Calculate the absolute value of the current account balance

Since we're looking for the percentage of the GDP that the current account balance represents, we should use the absolute value of the current account balance. In this case, the absolute value of \(-484\) billion is \(484\) billion.
03

Divide the absolute value of the current account balance by the GDP

Now, we need to divide the absolute value of the current account balance (\(484\) billion) by the GDP (\(18,036\) billion). This can be written as: \(\frac{484}{18,036}\)
04

Multiply the result by 100

To find the percentage, we need to multiply the result from Step 3 by 100. This can be written as: \(\frac{484}{18,036} \times 100\)
05

Calculate the percentage

Now, perform the calculation: \(\frac{484}{18,036} \times 100 \approx 2.68\)
06

Interpret the result

The current account balance represents approximately \(2.68\%\) of the GDP for the United States.

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Most popular questions from this chapter

A government official announces a new policy. The country wishes to eliminate its trade deficit, but will strongly encourage financial investment from foreign firms. Explain why such a statement is contradictory.

In recent decades, has the U.S. trade balance usually been in deficit, surplus, or balanced?

Will nations that are more involved in foreign trade tend to have higher trade imbalances, lower trade imbalances, or is the pattern unpredictable?

If imports exceed exports, is it a trade deficit or a trade surplus? What about if exports exceed imports?

Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.
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