Can a country have exports larger than its GDP—that is,
can it have an export ratio greater than one?
It would seem that the answer must be no: A country
cannot export more than it produces, so that the export
ratio must be less than one. Not so. The key to the answer
is to realize that exports and imports may include exports
and imports of intermediate goods.
Take, for example, a country that imports intermediate
goods for $1 billion. Suppose it then transforms them into final
goods using only labor. Say labor is paid $200 million and that
there are no profits. The value of these final goods is thus equal
to $1,200 million. Assume that $1 billion worth of final goods is
exported and the rest, $200 million, is consumed domestically.