3 ms·

That seems very strange to me that GDP is the same, when import:export is 4:3 or 3:2, but explains why someone would care more about the difference than the abs

• yread 1y ago
  If you import something and immediately export it the ratio changes but the difference doesnt
• notahacker 1y ago
  They're accounting identities, not casual relationships. Exports are stuff that's part of domestic product (but not consumed domestically) so get added. Imports are stuff domestic consumers get the benefit of but aren't actually produced domestically, hence the direction of the signs in the accounting identity. The 4:3 ratio is consistent with an economy which might be more open than a 3:2 one, but it doesn't actually have a higher GDP unless there's higher consumption or investment or government spending as a result of the extra trade. The key part is that nobody should care about any values or ratios in isolation or impute causality that isn't there. Otherwise people start believing that doing crazy stuff to shrink a trade deficit results in higher GDP, as opposed to lower C+I+G. And when those people are sufficiently stubborn and sufficiently powerful, you get $economy shrank 0.5% in the first quarter headlines...