Question

First, watch the PBS NewsHour video "How Germany Became Europe's Richest CountryLinks to an external site." and read the Bloomberg article "German Trade Surplus Widens as Exports Unexpectedly IncreaseLinks to an external site." to learn more about German approach to trade and creating an export surplus.

Then, respond to the following two questions -
Find out the contribution of trade to German GDP output and its current trade balance using data from WorldBankLinks to an external site.. What is the contribution of trade to German GDP and does Germany have a trade surplus?
If so, what is Germany doing differently to create manufacturing jobs and export surplus?
What lessons can we learn to reduce the U.S. trade deficit?

Answer 1

A trade surplus occurs when a country exports more goods and services than it imports. It can benefit an economy through increased revenue, economic growth, and job creation. However, a trade surplus in a poorly performing economy may indicate structural issues and a reliance on exports.

Step-by-step explanation:

Trade Surplus and its Benefits

A trade surplus occurs when a country exports more goods and services than it imports. In a scenario where a trade surplus benefits an economy, the country earns more revenue from its exports, which can lead to increased economic growth and job creation. This surplus can also result in a stronger domestic currency, making imports cheaper and improving the purchasing power of consumers.

Trade Surplus in a Poor-Performing Economy

In a scenario where a trade surplus is occurring in a poorly performing economy, it could indicate structural issues such as lack of domestic competitiveness or insufficient domestic demand. This can result in a dependence on exports to drive economic growth, which may not be sustainable in the long term.

Factors Influencing Trade Surplus Outcome

Key factors that can influence the outcome of a trade surplus include:

1. Competitive Advantage: Countries that have a competitive advantage in producing certain goods or services are more likely to have a trade surplus.
2. Domestic Demand: Strong domestic demand can help absorb domestic production and reduce reliance on exports.
3. Exchange Rates: Favorable exchange rates can make exports cheaper and attractive to foreign buyers.