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.
Exports and imports therefore both equal $1 billion.
What is GDP in this economy? Remember that GDP is
value added in the economy (see Chapter 2). So, in this example,
GDP equals $200 million, and the ratio of exports
to GDP equals $1,000>$200 5.
Hence, exports can exceed GDP. This is actually
the case for a number of small countries where most
economic activity is organized around a harbor and
import–export activities. This is even the case for small
countries such as Singapore, where manufacturing plays
an important role. In 2010, the ratio of exports to GDP in
Singapore was 211%!