We know that a countrys gdp is the sum of consumption

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Unformatted text preview: at about 20 percent of their exports were going to China. How much a country exports affects a country’s GDP. We know that a country’s GDP is the sum of consumption, investment, government purchases, and exports minus imports. Thus, the higher exports are, the higher a country’s GDP. One of the things that worried South Korea, Taiwan, and Japan in 2005 was the fact that China’s importation of foreign goods was beginning to slow. In other words, China was starting to buy less from South Korea, Taiwan, and Japan. If this were to continue, we could expect the GDP of these countries to decline, all other things being equal. If foreign countries started buying less from the United States, how would the U.S. GDP be affected? ECONOMIC THINKING E X A M P L E : A country produces one good, X, which it sells for $4 in 1990, $8 in 1999, and $10 in 2005. It produces 40 units of X in 1990, 45 units in 1999, and 40 units in 2005. If 1990 is designated as the base year, what is the real GDP in each of the three years we designated: 1990, 1999, and 2005? To find out...
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This document was uploaded on 01/16/2014.

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