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Relationship between Export and Gross Domestic Product

Free «Relationship between Export and Gross Domestic Product» Essay Sample

Export includes goods and services that are produced within a country but later are sold outside its borders. Gross domestic product is the total revenue that is generated by a country within a particular year. Gross domestic product is a sum of various components such as net export of goods and services, private consumption, government purchases, and gross investments. Private consumption can be defined as the amount of revenue that is generated during the sale and purchase of goods and services by a household (Mankiw, and Taylor 110). Private consumption can also be referred to as personal consumption; it entails the consumption of both non-durable and durable products, and services.

The investment component of the gross domestic product is concerned with the acquisition of goods and services that will be appreciated in value. Investment activities aim at increasing the value of a commercial entity or a business individual. During the determination of gross domestic product, one should be keen enough to include products and services that have been newly produced, and exclude those that have been replaced or recycled. Failure to exclude such items will lead to double count; hence, the economist will overstate the total gross domestic product (Mankiw 86). Government spending pertains to all kinds of outflows that are made by the government. The outflows can be made for purposes of financing the acquisition of military hardware, and the remuneration of public servants. However, it is essential to note that this kind of spending is only included if the outflows are intended for the procurement of the final products and services. This means that government transfers are excluded during the calculation of the gross domestic product.

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Net exports are determined by subtracting total exports from total imports. Import includes services and goods that are produced in foreign economies but later consumed locally. Such items should be excluded from the calculation of the gross domestic product because their inclusion will overstate the level of national supply (Mankiw, and Taylor 107). This paper studies the relationship between exports and gross domestic product per capita. The graphs above contain data for the United States of America in the period between 2001 and 2012. According to the graphs, it is evident that the amount of exports has been increasing since 2001. It is necessary to note that the increase has not been extremely steady; there have been few instances of slight decreases in the level of exports (Data in Gapminder World n. p.). These decreases in the level of exports did not have a significant influence on the gross domestic product. In 2009, the US experienced such decline in the level of exports. From the graph on gross domestic product per capita, it is clear that the level of gross domestic product has been increasing steadily since 2001. However, between 2008 and 2009 there was a significant decline in gross domestic product per capita. Thereafter, the amount of gross domestic products generated commences to increase again in the next few years.


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From the two graphs, one can notice interdependence between the gross domestic product per capita and the level of exports. The two variables have a direct relationship, whereby an increase in the levels of exports consequently results in an increase of the gross domestic product. One should note that there are instances when the level of exports increases or decreases; however, the same increase or decrease is not reflected on the gross domestic product at all (Mankiw 89). This is because, in the determination of gross domestic product, imports have an impact on the net export of a country. According to the two graphs, the US experienced a rapid decline in exports and gross domestic products in 2007 and 2009. This is attributed to the fact that, during this period, the United States of America was facing the global financial crisis.

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