chapter  4
26 Pages

Factor endowments and the commodity composition of trade

This chapter reviews the concept of Gross Domestic Product (GDP) to understand how international trade is an important part of overall economic activity and issues to consider when calculating GDP. To clarify the role of imports and exports in an economy, the chapter examines the interactions among the various components of GDP. The chapter goes beyond trade in goods and services by considering a country's balance of payments. Studying the balance of payments for a country gives complete picture of a country's range of interactions with the rest of the world. It describes the major subcomponents of GDP and examines the interactions among the major components of GDP in a way that highlights the role of international trade in a country's economy. GDP is an important statistic, so people spend some time considering how it is calculated. The chapter explains the details of the inflows and outflows of money in a country.