The table below shows an extract from balance of payments for country A. Use the table to answer the questions that follow: Balance of payments items Items ...
Question 1 Report
The table below shows an extract from balance of payments for country A. Use the table to answer the questions that follow:
Balance of payments items
| Items of transaction | Receipts ($) | Payment ($) | |
| 1 | Merchandise (visible trade) | 52,000.00 | 40,000.00 |
| 2 | Shipping, other transport and travel | 4,000.00 | 8,000.00 |
| 3 | Investment income | 20,000.00 | 5,000.00 |
| 4 | Other services | 2,500.00 | 7,500.00 |
| 5 | Unrequired transfers | 22,800.00 | 7,000.00 |
| 6 | Direct investment | 50,000.00 | 26,000.00 |
| 7 | Other long-term capital | 254,000.00 | 289,000.00 |
| 8 | Short-term capital | 221,000.00 | 238,000.00 |
Calculate the:
(a) balance of trade (3 marks)
(b) balance on current account (8 marks)
(c) balance on capital account (6 marks)
(d) balance of payment (3 marks)
Answer Details
(a) Balance of trade (visible/merchandise exports minus imports)
\[52{,}000 - 40{,}000 = +\$12{,}000\ \text{(surplus)}\]
(b) Balance on current account (items 1 to 5: visible trade plus services, income and transfers)
Receipts: \(52{,}000 + 4{,}000 + 20{,}000 + 2{,}500 + 22{,}800 = 101{,}300\)
Payments: \(40{,}000 + 8{,}000 + 5{,}000 + 7{,}500 + 7{,}000 = 67{,}500\)
\[101{,}300 - 67{,}500 = +\$33{,}800\ \text{(surplus)}\]
(c) Balance on capital account (items 6 to 8)
Receipts: \(50{,}000 + 254{,}000 + 221{,}000 = 525{,}000\)
Payments: \(26{,}000 + 289{,}000 + 238{,}000 = 553{,}000\)
\[525{,}000 - 553{,}000 = -\$28{,}000\ \text{(deficit)}\]
(d) Balance of payments (current account plus capital account)
\[33{,}800 + (-28{,}000) = +\$5{,}800\]
The overall balance of payments is a surplus of \$5,800.
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