Subpart (a):
Level of export.
Subpart (a):
Explanation of Solution
The level of export for each of the last five years of 2000 is tabulated below:
Table 1
YEAR | EXPGSCA |
1996 | 986.033 |
1997 | 1103.500 |
1998 | 1129.281 |
1999 | 1159.146 |
2000 | 1258.433 |
From Table 1, it can be inferred that the exports increase every year.
Concept introduction:
Export: Export refers to a trading of goods and services from a domestic country to a foreign country.
Subpart (b):
Level of import.
Subpart (b):
Explanation of Solution
The level of import for each of the last five years of 2000 is given in Table 2.
Table 2
YEAR | IMPGSCA |
1996 | 1100.592 |
1997 | 1248.825 |
1998 | 1394.798 |
1999 | 1536.232 |
2000 | 1736.215 |
From Table 2, it can be inferred that the imports increase every year.
Concept introduction:
Import: Import refers to the goods and services that are bought domestically but are produced in foreign countries.
Subpart (c):
Trade deficit .
Subpart (c):
Explanation of Solution
The trade deficit is calculated using the following equation:
Since the value of import is greater than that of exports, a trade deficit exists. Substitute the values in equation (1) to calculate the trade deficit for each year as follows:
The trade deficit for 2000 is 477.782.
Similarly, by substituting the values in equation (1), the trade deficit for each year is calculated and tabulated below:
Table 3
YEAR | TRADE DEFICIT |
1996 | 114.559 |
1997 | 145.325 |
1998 | 265.517 |
1999 | 377.086 |
2000 | 477.782 |
Concept introduction:
Trade deficit: Trade deficit is the situation where the country imports more goods and services than they export. It is the situation of negative trade balance, which means that the outflows of capital as payments to the imports are higher than the inflow of capital as revenue for the exports.
Subpart (d):
Trade deficit as a percentage of GDP .
Subpart (d):
Explanation of Solution
The trade deficit as a percentage of GDP is calculated using the following equation:
Substituting the values in equation (2), the trade deficit as a percentage of GDP for each year is calculated as follows:
The trade deficit as a percentage of GDP for 2000 is 3.80%.
Similarly, substituting values in equation (2), the trade deficit as a percentage of GDP for each of the last five years of 2000 is calculated and tabulated below:
Table 4
Year | Trade Deficit | GDPSCA | Trade Deficit as % Of GDP |
1996 | 114.559 | 10560.976 | 1.08% |
1997 | 145.325 | 11034.850 | 1.32% |
1998 | 265.517 | 11525.891 | 2.30% |
1999 | 377.086 | 12065.902 | 3.13% |
2000 | 477.782 | 12559.660 | 3.80% |
During recessions, that is, in years when the GDP falls from the previous year (starting Dec 2007 to 2009), the trade deficit tends to fall. Based on the information available in the given website, this can be tabulated as follows:
Table 5
Year | EXPGSCA | IMPGSCA | Trade deficit | GDPSCA |
2007 | 1646.394 | 2359.012 | 712.62 | 14873.734 |
2008 | 1740.825 | 2298.645 | 557.82 | 14830.359 |
2009 | 1587.741 | 1983.177 | 395.44 | 14418.738 |
2010 | 1776.595 | 2235.350 | 458.76 | 14783.809 |
The fall in trade deficit in recession may be attributed to a larger fall in imports of consumers and capital goods than in exports. Export is seen as more stable than imports during the recession, as per Table 5.
Concept introduction:
Trade deficit: Trade deficit is the situation where the country imports more goods and services than what they export. It is the situation of negative trade balance, which means that the outflows of capital as payments to the imports are higher than the inflow of capital as revenue for the exports.
GDP (Gross Domestic Product): Gross domestic product refers to the value of total goods and services produced in the given period of time, within the boundaries.
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EBK MODERN PRINCIPLES OF MICROECONOMICS
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