Which of the following statements is correct? (a) Now that...

Name: Problem 2, Chapter 29: Economics
Uploaded: 2022-03-15T13:28:06-08:00
Duration: 1 min 4 s
Channel: Haricharan Gupta
Description: Which of the following statements is correct? (a) Now that services account for over 80 per cent of GDP in most developed countries, trade in goods cannot be the major part of the world trade. (b) International trade in services is not possible. (c) The only reason that trade in goods remains so important is that countries import goods, add a bit and then re-export them.

Which of the following statements is correct? (a) Now that services account for over 80 per cent of GDP in most developed countries, trade in goods cannot be the major part of the world trade. (b) International trade in services is not possible. (c) The only reason that trade in goods remains so important is that countries import goods, add a bit and then re-export them.

Key Concepts

GDP Composition

This concept refers to the structure of a country's gross domestic product, particularly the relative contributions of services and goods sectors. In developed economies, while services may constitute a large percentage of GDP, this does not directly translate into a proportional share in international trade, because many services are non-exportable or subject to regulatory and intangible constraints.

International Trade in Services

This concept involves understanding that services, although often intangible and limited by factors such as regulation and localization, can and do cross borders. With advances in technology, services like finance, tourism, and IT have become increasingly tradeable, challenging the misconception that only tangible goods are suitable for international exchange.

Trade in Goods

The trade in tangible products is a longstanding element of global commerce. Goods are often easier to standardize, transport, and subject to fewer regulatory hurdles compared to services, which explains their significant presence in world trade despite a service-dominated GDP in many developed countries.

Global Value Chains

This concept describes the process by which products are manufactured in multiple countries, with countries importing intermediate goods, adding value through production stages, and then exporting the finished product. This shows that trade in goods is not solely about final products, but also about the complex distribution of production stages across borders, which cannot be oversimplified as merely importing and re-exporting.

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