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The Export-Import Sector. The Basis for International Trade The basis for international trade is that a nation can import a particular good or service.

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Presentation on theme: "The Export-Import Sector. The Basis for International Trade The basis for international trade is that a nation can import a particular good or service."— Presentation transcript:

1 The Export-Import Sector

2 The Basis for International Trade The basis for international trade is that a nation can import a particular good or service at a lower cost than if it were produced domestically –In other words, if you can buy it cheaper than you can make it you should buy it –This maxim is true for individuals and nations 8-3 Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved.

3 8-4 Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. Merchandise Imports and Exports as Percentage of Goods Produced in the United States, Since 1990 our imports and exports as a percentage of goods produced in the United States has grown steadily. More than one-quarter of all the goods produced here are shipped abroad, while our imports are equal to about one-third of the goods we produce in the United States

4 8-5 Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. Sum of U.S. Imports and Exports as Percentage of GDP, Between 1970 and 2000 the foreign trade sector nearly tripled as a percentage of GDP

5 8-6 Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. U.S. Balance of Trade in Goods, Services, and Overall Balance, (in billions of dollars) Since the late 1980s, we have been running a large and growing balance on services. Our balance on goods, which has been negative since the mid-1970s, has grown steadily worse since 1991 and now totals more than $300 billion

6 A Summing Up: C + I + G + Xn 8-7 Net exports = X n X n = Exports - Imports Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved.

7 C C+I C+I+GC+I+G+(X-M) Due to Imports being greater than Exports

8 8-8 Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. C + I + G + Xn Why is the C + I + G + X n line lower than the C + I + G line? Answer: It is lower because net exports (X n ) are negative

9 8-10 Copyright  2002 by The McGraw-Hill Companies, Inc. All rights reserved. The World’s Top Ten Exporting Nations, 1999


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