Sometimes we forget how many goods we use each day

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Unformatted text preview: nanas themselves. Sometimes we forget how many goods we use each day are purchased from people living in other countries. Our alarm clock might be produced in Belgium, our shoes in China, our watch in Switzerland. Take a look sometime at all the goods you use each day. How many are produced in foreign countries? What Are Exports and Imports? Exports are goods that are produced in the domestic country and sold to residents of a foreign country. For example, if residents of the United States (the domestic country) produce and sell computers to people in France, Germany, and Mexico, then computers are a U.S. export. In April 2005, the value of U.S. exports was $106.4 billion, which means that U.S. residents produced and sold $106.4 billion worth of U.S. goods and services to people in other countries—in just one month. Major U.S. exports include automobiles, computers, aircraft, corn, wheat, soy- 15 (390-427) EMC Chap 15 5/8/06 5:03 PM Page 395 beans, scientific instruments, coal, machinery, and plastic materials. Imports are goods produced in foreign countries and purchased by residents of the domestic country. For example, if residents of the United States (the domestic country) buy coffee from Colombia, then coffee is a U.S. import. In April 2005, the value of U.S. imports was $163.4 billion; U.S. residents, again, in just one month, bought $163.4 bil- EXHIBIT 15-1 lion worth of goods and services from people in other countries. Major U.S. imports include petroleum, clothing, iron, steel, office machines, footwear, fish, coffee, and diamonds. Exhibit 15-1 shows the value of exports and the value of imports for the period from 1980 to 2005. Exhibit 15-2 on the next page shows the number of imported cars in each year during the same period. Which had the bigger percentage increase from 1980 to 2005— exports or imports? Based on your earlier study of GDP, did this difference contribute to an increase or decrease in the GDP? Value Value of U.S. Exports and Imports, 1980–2005 and Imports, 2005 $900 $800 $700 Exp s Exports Billions of $ imports Goods produced in foreign countries and purchased by residents of the domestic country. $600 $500 $400 $300 $200 05 04 04 20 03 03 20 02 02 20 01 01 20 00 00 20 99 99 20 98 98 19 97 19 96 19 97 95 19 94 19 93 19 92 19 91 19 90 19 89 19 88 19 87 19 86 19 85 19 84 19 83 19 82 19 81 19 19 19 80 $100 Year $1,750 $1,500 $1,000 Imports mpo $750 $500 $250 05 20 20 20 20 20 20 19 19 19 96 95 19 19 94 19 93 92 19 19 91 90 19 19 89 19 88 87 19 19 86 19 85 84 19 19 83 82 19 19 81 19 80 0 19 Billions of $ $1,250 Year Source: Economic Report of the President, 2005. Section 1 International Trade 395 15 (390-427) EMC Chap 15 9:12 AM EXHIBIT 15-2 Page 396 Number Number of Imported Cars, 1980–2005 Imported Cars, 1980 2005 4.0 3.8 3.6 3.4 Imported cars (millions) Why do you think the number of cars imported to the U.S. declined during the period from the late 1980s to mid-1990s? 11/18/05 3.2 3.0 2.8 2.6 2.4 2.2 May 2.0 1.8 1.6 1.4 1.2 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 9 20 9 00 20 0 20 1 02 20 0 20 3 0 20 4 05 20 06 20 0 20 7 08 1.0 Year Source: U.S. Department of Commerce, Bureau of Economic Analysis. Balance of Trade QUESTION: I noticed that the value of balance of trade The difference between the value of a country’s exports and the value of its imports. exports in April 2005 was less than the value of imports. In other words, Americans bought more from people in other countries than the people in other countries bought from Americans. Does it happen this way in most months? ANSWER: Yes, in the recent history of the The United States is a major importer of bananas. United States, during most months, Americans buy more from people in other countries than people in other countries buy from Americans. A country’s balance of trade is the difference between the value of its exports and the value of its imports. Balance of trade Value of exports Value of imports For example, if the value of a country’s exports is, say, $300 billion (for the year) and the value of its imports is $200 billion, then the country has a positive balance of trade ($100 billion) or is said to have a trade surplus. If the value of a country’s exports is $100 billion and the value of its imports is $210 billion, then the country has a negative balance of trade (–$110 billion) or is said to have a trade deficit. QUESTION: What is the recent trade his- tory of the United States? Has it mostly had a trade surplus or trade deficit? ANSWER: From 1946 through 1970, the United States had a trade surplus. 396 Chapter 15 International Trade and Economic Development 15 (390-427) EMC Chap 15 11/18/05 9:12 AM Page 397 Beginning in 1971 (and with the exception of 1973 and 1975) it has had a trade deficit. If you would like to check the status of U.S. exports and imports for the latest month and year, you can go to the U.S. Census Bureau (Foreign Trade...
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