If a country consistently has more imports than exports how do they avoid running out of money?
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Countries print their own money. If people are willing to send actual finished goods to one country in exchange for fancy paper, that’s really great for the country with the higher imports.
problem is not whats more import or export but the value of each. for example (imaginary)
i export coffee, persian rugs, warmaschines, tools and cloths for big $$$$$
i import some fish, some wood and maybe something to drink for low $
if you make more money with your exports you dont run out of money.
A simplified way to think about this is to break down a country’s economy into three components:
* Domestic market
* Foreign trade
* Investments
Import and exports are about foreign trade, but the economy in country like the US can have massive domestic market and investments.
E.g., the United States every year imports $500 *billion* more goods than it exports (2019 figures), but in comparison the total size of the US economy (GDP) is around $21 *trillion*.
So even though the US is a net importer, generally the US economy remains strong because of a robust domestic market and large amount of capital investments.
How much you import/export hasn’t got to do with making or losing money. A country can have 100% imports and make money. Because they resell those goods and services at a higher price. A really simple example is I import a phone from China and resell it for 100 profit. Now imagine lots of companies buying materials, parts, services etc and doing the same thing. Import /export is just a way of seeing a countries competitive advantage in a way. Hence manafacturing heavy countries like China and India may have higher exports than imports.
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