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Chapter 10: Q. 20 (page 266)

The United States exports 14% of GDP while Germany exports about 50% of its GDP. Explain what that means.

Short Answer

Expert verified

Level of trade of Japan is higher than the level of trade of US.

Step by step solution

01

Step1. Given information

US exports 14% of GDP

Germany exports 50% of GDP

02

Step2. Explanation

When we say US exports 14% of its GDP, it implies the export value of US accounts for a 14% of its GDP, i.e. 14% of its economic activity comes from exports.

Similarly for Germany, it means 50% of the GDP is coming from exports.

So, we can conclude that Germnay is indulged in more trading activities, particularly exports than the US comparatively. We say it is relative because the GDP size of the countries shall be different too.

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Most popular questions from this chapter

If domestic investment increases, and there is no change in the amount of private and public saving, what must happen to the size of the trade deficit?

Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1% of Germany鈥檚 GDP; private savings is 20% of GDP; and physical investment is 18% of GDP.

a. Based on the national saving and investment identity, what is the current account balance?

b. If the government budget surplus falls to zero, how will this affect the current account balance?

What are the main components of the national savings and investment identity?

If the trade deficit of the United States increases, how is the current account balance affected?

If a country is running a government budget surplus, why is (T 鈥� G) on the left side of the saving investment identity?
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