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How Imports Effect GDP
Imports are defined as “goods and services that are produced by foreigners” (outside the borders of the United States) “but are purchased by domestic consumers, businesses, and governments” (within the United States). (James D. Gwartney, 2011) The Gross Domestic Product (GDP) is defined as “the market value of all final goods and services produced within a country during a specific period”. (James D. Gwartney, 2011) Since imports are not made in the United States, the money spent on these goods is not included in the GDP. In fact, in the GDP equation of: consumer consumption + business investments + government spending + net exports; net exports is reached by subtracting imports from exports.
Imports to the United States, generate income for the countries we purchase and trade with. If we spend more money on importing goods than we earn by exporting good, this negatively affects the GDP. Higher exports and lower imports will positively impact the GDP. A higher import value is what adds to our deficit. In 2007 our exports were at 12%, while our imports came to 17%; therefore creating a 5% deficit in GDP. In recent years this gap has been shrinking; but we must also consider the value of the dollar. During a recession the value of our dollar goes down, making our exports cheaper for foreign countries to buy, but making it more expensive for the United States to purchase imports. As the dollar appreciates this will even out and the gap will shrink. (Mcteer, 2008)
In 2011, the United States spent $2.263 Trillion on imported goods. Oil was our highest import at $464.3 Billion, which came to 20.5% of our imported goods. When we import goods, taxes and tariffs are also added to the cost. The consumer ultimately pays for this. But again, the price we pay for our imports is not included in the GDP. It is subtracted from our total export numbers. (World's Richest Countries, 2013)
In the Bible, Ezekiel 28: 4-8, we read, “By your wisdom and understanding you have gained wealth for yourself and amassed gold and silver in your treasuries. By your great skill in trading you have increased your wealth, and because of your wealth your heart has grown proud. Therefore this is what the Sovereign Lord says: ‘Because you think you are wise, as wise as a god, I am going to bring foreigners against you, the most ruthless of nations, they will draw their swords against your beauty and wisdom and pierce your shining splendor. They will bring you down to the pit, and you will die a violent death in the heart of the seas.” I believe that what is meant by this, is that we are trade fairly, with honesty, and not be greedy or dishonest. When we are selfish traders and buyers, we are being greedy and dishonest. Trading and buying from our “neighbors” should be beneficial to all parties involved. When we get selfish greedy, we are doomed. (Bible Gateway, 2013)