Imports and Economic Growth

By Humpage, Owen F.; Herrell, Caroline | Economic Trends, February 2010 | Go to article overview

Imports and Economic Growth


Humpage, Owen F., Herrell, Caroline, Economic Trends


02.02.10

A quick look at the latest GDP data might suggest that imports are slowing the domestic recovery. A quick look might get it wrong.

Real GDP--the chief barometer of our nation's economic health--increased 5.7 percent in the fourth quarter of 2009, according to advance estimates. In a standard analysis of the data, the Commerce Department calculates the contribution that each spending category in the accounts makes to the overall GDP growth rate. In the fourth quarter of 2009, inventory accumulation alone added a whopping 3.4 percentage points to the overall growth rate. Expanding exports, personal consumption expenditures, and business and residential investment together added another 3.7 percentage points to the quarter's growth. In stark contrast to these growth contributors, expanding imports seem to have pulled overall economic growth down by 1.4 percentage points to the observed 5.7 percent. Expanding imports always appear as a drag on overall economic growth.

[GRAPHIC OMITTED]

This unfortunate false perception results because imports enter the GDP account with a negative sign. Consequently, whenever imports increase, which is typically the case in a growing, open economy, they appear to take bite out of GDP growth. Appearances can indeed be deceiving. In fact, imports promote economic growth.

[GRAPHIC OMITTED]

Interpreting imports in the GDP accounts requires some care. GDP measures the value of all final goods and services produced in the United States over each quarter. Last quarter, for example, the United States produced $13.2 trillion worth of output, as measured in 2005 dollars. Since imported goods are not produced here, they do not belong in the tally, but taking them out creates a small perceptual problem. The key expenditure categories of the GDP accounts, like personal consumption, business-fixed investment, and government spending, do not distinguish between outlays for goods and services produced in the United States and spending on goods produced abroad. That is, imports are already in these categories. Instead of removing imports from each individual spending category, the Commerce Department lists imports as a separate component in the accounts, which then gets subtracted from the total. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Imports and Economic Growth
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.