The U.S. is often blamed for triggering the 2008 global financial crisis because many of the excesses and bad practices originated in the U.S. The crisis has had consequences on all aspects of the global economy. According to a recent report by Brookings Institute, the U.S. economic crisis is linked to a huge drop in world trade. Since U.S. imports have been an important component of world demand, a drop in imports has had repercussions in its exports. Rami Horowitz is a young economist working for a trade policy institute. He wishes to analyze the changes in U.S. imports and exports over the 2007-2009 time period. Rami collects quarterly data on real exports and real imports, where the values are seasonally adjusted and measured in billions of 2005 dollars. A portion of the data is shown in the accompanying table.

Data for Case Study 19.2 U.S. Real Exports and Imports

Period.............. Real Exports............. Real Imports

2007: Quarter 1.......... 1485.9.................... 2190.8

2007: Quarter 2.......... 1504.8.................... 2188.1

⋮............................................... ⋮.....................................⋮

2009: Quarter 4......... 1555.5...................... 1902.7

In a report, use the sample information to:

1. Create simple indices for real exports and real imports with Quarter 1, 2007, used as the base period.

2. Interpret the percentage changes in real exports and real imports over the three-year period?