Start with the facts about the trade deficit (also known as the “balance of trade”), the most widely discussed part of the balance of payments. Head to the database run by the Federal Reserve Bank of St. Louis, research.stlouisfed.org/fred2. In the search box, look for data on two series, EXPGSCA (real annual exports in year 2000 dollars) and IMPGSCA (real annual imports in year 2000 dollars). Below each graph, you should see the raw annual data for the last five years.
a. What was the level of exports for each of the last five years? Did exports rise every year?
b. What was the level of imports for each of the last five years? Did imports rise every year? If not, did exports and imports fall at the same time?
c. How big was the trade deficit (or surplus) each year?
d. Divide each year’s number by real GDP for each year (GDPCA): What was the trade deficit (or surplus) as a percentage of GDP each year? In years when GDP fell from the previous year, did the trade deficit rise or fall?