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CHAPTER 5
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The United States in the Global Economy
financial markets. That web is so complex that it is difficult to determine just what is—or isn’t—an
American product. A Finnish company owns Wilson sporting goods; a Swiss company owns Gerber
baby food; and a South African corporation owns Miller Brewing. The Chrysler PT Cruiser is as-
sembled in Mexico. Many “U.S.” products such as Boeing aircraft contain numerous components
from abroad, and, conversely, many “foreign” products such as Airbus planes contain numerous
U.S.-produced parts.

International Linkages The United States and

Several economic flows link the U.S. economy and the World Trade
economies of other nations. As identified in Figure 5.1 , Our main goal in this chapter is to examine trade flows
these flows are: and the financial flows that pay for them. What is the ex-
• Goods and services flows or simply trade flows The tent and pattern of international trade, and how much has
United States exports goods and services to other na- that trade grown? Who are the major participants?
tions and imports goods and services from them.
• Capital and labor flows or simply resource flows
U.S. firms establish production facilities—new Volume and Pattern
capital—in foreign countries, and foreign firms Table 5.1 suggests the importance of world trade for se-
establish production facilities in the United States. lected countries. Many countries, with restricted resources
Labor also moves between nations. Each year many and limited domestic markets, cannot efficiently produce
foreigners immigrate to the United States and some the variety of goods their citizens want. So they must im-
Americans move to other nations. port goods from other nations. That, in turn, means that
• Information and technology flows The United they must export, or sell abroad, some of their own prod-
States transmits information to other nations about ucts. For such countries, exports may run from 25 to
U.S. products, prices, interest rates, and investment 50 percent or more of their gross domestic product (GDP)—
opportunities and receives such information from the market value of all goods and services produced in an
abroad. Firms in other countries use technology cre- economy. Other countries, the United States, for example,
ated in the United States, and U.S. businesses incor- have rich and diversified resource bases and large internal
porate technology developed abroad. markets. Although the total volume of trade is huge in the
• Financial flows Money is transferred between the United States, it constitutes a smaller percentage of GDP
United States and other countries for several pur- than it does in a number of other nations.
poses, for example, paying for imports, buying for-
eign assets, paying interest on debt, and providing Volume For the United States and for the world as a
foreign aid. whole the volume of international trade has been increasing

FIGURE 5.1 International linkages. The U.S. economy is
Goods and services intertwined with other national economies through goods and services flows
(trade flows), capital and labor flows (resource flows), information and
technology flows, and financial flows.
Capital and labor
UNITED OTHER
STATES NATIONAL
ECONOMY ECONOMIES
Information and technology

Money

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