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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?
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,
To find out...
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This document was uploaded on 01/16/2014.
- Winter '14