Trade Balances in Historical and International Context

Self-Check Questions

In what way does comparing a country’s exports to GDP reflect its degree of globalization?

Hint:

GDP is a dollar value of all production of goods and services. Exports are produced domestically but shipped abroad. The percent ratio of exports to GDP gives us an idea of how important exports are to the national economy out of all goods and services produced. For example, exports represent only 14% of U.S. GDP, but 50% of Germany’s GDP

At one point Canada’s GDP was $1,800 billion and its exports were $542 billion. What was Canada’s export ratio at this time?

Hint:

Divide $542 billion by $1,800 billion.

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?

Hint:

Divide –$400 billion by $16,800 billion.

Why does the trade balance and the current account balance track so closely together over time?

Hint:

The trade balance is the difference between exports and imports. The current account balance includes this number (whether it is a trade balance or a trade surplus), but also includes international flows of money from global investments.