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    Current page location: Home > Answers > What does it mean when exports or imports of a country are more than 100% of its GDP?
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    Mary Chang
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    What does it mean when exports or imports of a country are more than 100% of its GDP?

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    • Time:2018-09-12 11:17:09
    What does it mean when exports or imports of a country are more than 100% of its GDP?
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    Krise Wu
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    I think the other answers here are a bit technical, so let's simplify it a little and explain why exports might exceed 100% of GDP. 

    As pointed out, GDP is made up of five components, Consumption, Investment, Governmentspending, Exports, and Imports,or C+I+G+X-M.


    Let's start with a small country that has $1 billion in consumption, $1 billion in investment and $1 billion in government spending. GDP so far is $3 billion.

    This small country happens to host a large car factory. Of course, a small country only needs so many cars, so the country exports most of these cars, making $4 billion in foreign sells. Now GDP is $7 billion.

    With all that wealth coming in from the car factory, the country uses that money to import a bunch of products that it can't produce on its own, so now it has $4 billion in imports. Since imports are subtracted from GDP, total GDP goes back to $3 billion.

    In this case, exports equal 133% of GDP ($4 billion / $3 billion).

    This is essentially what happens in small countries with high productivity like Luxembourg and Singapore. Due to their small size, instead of trying to be self-sufficient and produce all the products their population needs, they specialize in a few highly-profitable industries. These industries may produce more money from exports than the entire domestic economy. All that money from exports allows them to purchase imports far into excess of what their domestic economy could otherwise support.

    #1Floor 2018-09-12 14:05:04 Reply(0)
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