The table below shows the composition of exports and imports of a hypothetical country. Use the information in the table to answer the questions that follow...

Answer Details

First we sort each item into visible (physical goods that cross the border) and invisible (services).

(a) Value of visible exports

\[ 120{,}000{,}000 + 40{,}000{,}000 + 80{,}000{,}000 = \$240{,}000{,}000 \]

(b) Balance of trade = visible exports \( - \) visible imports. Visible imports \( = 140m + 80m + 50m = \$270{,}000{,}000 \).

\[ 240{,}000{,}000 - 270{,}000{,}000 = -\$30{,}000{,}000 \]

A balance of trade deficit of \$30,000,000.

(c) Invisible items

• Invisible exports: Tourism and Shipping & Insurance.
• Invisible imports: Banking Services and Freight and Insurance.

(d) Current account balance = (visible + invisible exports) \( - \) (visible + invisible imports).

Total exports \( = 240m + (45m + 60m) = 345{,}000{,}000 \). Total imports \( = 270m + (60m + 40m) = 370{,}000{,}000 \).

\[ 345{,}000{,}000 - 370{,}000{,}000 = -\$25{,}000{,}000 \]

A current account deficit of \$25,000,000.

(e) The country is developing. Its exports are dominated by primary/unprocessed products (crude oil, groundnuts, bauxite) while it imports refined and manufactured goods (petroleum products, vehicles), which is the typical trade pattern of a developing economy.