Why Do Nations Trade? Importance of Trade to the U.S. Economy How important are exports (American goods purchased by foreigners) and imports (foreign products purchased by Americans) to the U.S. economy? Many goods and services are nontradeable, e.g. most buildings and most personal and governmental services. So, what proportion of the nation's output that is potentially exportable is, in fact, exported? In 1994, U.S. exports of goods were equal to 24% of the domestic output of goods. This is up from 8% in 1960 and 16% in 1980. What change has occurred in the relation of goods imported to goods consumed? In 1994, imports accounted for 28% of total goods consumed compared to just 7% in 1960. Impact of Globalization on U.S. Economy • foreign economic conditions impact on the U.S. economy • U.S. more dependent on foreign suppliers • more competition in domestic markets: price of imported products falls, benefiting consumers but hurting U.S. producers of the goods Why Does Trade Occur? In some ways the Japanese are our competitors in the world economy since American and
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