Chapter 10: Q. 29 (page 266)
Does a trade surplus help to guarantee strong economic growth?
No, not always.
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In 2001, the United Kingdom's economy exported
goods worth £192 billion and services worth another £77 billion. It imported goods worth £225 billion and services worth £66 billion. Receipts of income from abroad were £140 billion while income payments going abroad were £131 billion. Government transfers from the United Kingdom to the rest of the world were £23 billion, while various U.K government agencies received payments of £16 billion from the rest of the world.
a. Calculate the U.K. merchandise trade deficit for
2001.
b. Calculate the current account balance for 2001.
c. Explain how you decided whether payments on
foreign investment and government transfers
counted on the positive or the negative side of
the current account balance for the United
Kingdom in 2001.
In what way does comparing a country’s exports to GDP reflect its degree of globalization?
What is more important, a country’s current
account balance or GDP growth? Why?
If imports exceed exports, is it a trade deficit or a trade surplus? What about if exports exceed imports?
What determines the size of a country’s trade deficit?
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