10/26/2022

Trade Imbalances

Trade Imbalances & Subtitle

Jobs

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• 1st Story – More imports lead to domestic job loss

• 2nd Story- Low exports are because of high trade restrictions
• The Complete Story
• Twist in the story
• Then why so much hue and cry?
• Does historical figures support the argument?

Instructor: H.A. Qureshi 3

Trade Imbalances & Subtitle

National Welfare

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• What is national welfare?

• Is GDP a proxy for National Welfare?
• What about Domestic Savings as a proxy? DS = C + I + G
• Is Domestic Spending a good proxy?
• GDP = C + I + G + EX − IM
• GDP = DS + EX − IM
• EX − IM = GDP − DS
• Is it GDP or GNP when we include ‘EX-IM?
Instructor: H.A. Qureshi 5

Case I: No
Trade
Imbalances,
No GNP
Growth

Instructor: H.A. Qureshi 6

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Case II: CA
Deficit
Period 1; No
GDP
Growth
between
Periods

Instructor: H.A. Qureshi 7

Case III: CA
Deficit Period
1; Positive
GDP Growth
between
Periods

Instructor: H.A. Qureshi 8

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Case IV:
Current
Account
Surplus
Period 1; No
GDP Growth
between
Periods

Instructor: H.A. Qureshi 9