Let’s examine the U.S. balance of trade (Exports-Imports) as we did in Problem 1, but this time we will do so as a percent of GDP. Using the FRED economic database (https://fred.stlouisfed.org/), search for U.S. Exports. Again, find the series EXPGS (use this series rather than the series for real exports). Click Edit Graph and Modify Frequency to change to an annual rate (use the average method). Now, under Customize Data look for a similar series for imports (IMPGS) and add it. Now, under Customize Data search for gross domestic product (again, don’t use real GDP), and add that. 

You now have three series, Exports (a), Imports (b), and Gross Domestic Product (c). Write a formula for the balance of trade as a percentage of GDP using a, b and c, and enter it in the formula box, clicking Apply. 

a. In 2005, before the 2008–2009 recession, what was the trade deficit as a percent of GDP?

b. In 2009, during the recession, what was the trade deficit as a percent of GDP?

c. Was the trade deficit bigger or smaller in 2009 compared to 2005? Why? Using your answers to this Problem and Problem 1, comment on whether a trade deficit is necessarily a bad thing.