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Chapter 23: Problem 6

The GDP for the United States is \(\$ 18,036\) billion and its current account balance is \(-\$ 484\) billion. What percent of GDP is the current account balance?

Short Answer

Expert verified
The current account balance represents approximately \(2.68\%\) of the GDP for the United States.

Step by step solution

01

Write down the given values

The GDP for the United States is given as \(18,036\) billion, and its current account balance is given as \(-484\) billion.
02

Calculate the absolute value of the current account balance

Since we're looking for the percentage of the GDP that the current account balance represents, we should use the absolute value of the current account balance. In this case, the absolute value of \(-484\) billion is \(484\) billion.
03

Divide the absolute value of the current account balance by the GDP

Now, we need to divide the absolute value of the current account balance (\(484\) billion) by the GDP (\(18,036\) billion). This can be written as: \(\frac{484}{18,036}\)
04

Multiply the result by 100

To find the percentage, we need to multiply the result from Step 3 by 100. This can be written as: \(\frac{484}{18,036} \times 100\)
05

Calculate the percentage

Now, perform the calculation: \(\frac{484}{18,036} \times 100 \approx 2.68\)
06

Interpret the result

The current account balance represents approximately \(2.68\%\) of the GDP for the United States.

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Most popular questions from this chapter

Using the national savings and investment identity, explain how each of the following changes (ceteris paribus) will increase or decrease the trade balance: a. A lower domestic savings rate b. The government changes from running a budget surplus to running a budget deficit c. The rate of domestic investment surges

What is the difference between trade deficits and balance of trade?

Why does the trade balance and the current account balance track so closely together over time?

Will nations that are more involved in foreign trade tend to have higher trade imbalances, lower trade imbalances, or is the pattern unpredictable?

Many think that the size of a trade deficit is due to a lack of competitiveness of domestic sectors, such as autos. Explain why this is not true.
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