The extract from a country’s balance of payments account is shown below. Item Import ($ million) Export ($ million) Agricultural products ------ 200 Mineral...
Question 1 Report
The extract from a country’s balance of payments account is shown below.
| Item | Import ($ million) | Export ($ million) |
| Agricultural products | ------ | 200 |
| Mineral products | ----- | 300 |
| Consumer goods | 250 | ---- |
| Capital goods | 400 | ---- |
| Insurance | 50 | 25 |
| Banking | 75 | 30 |
| Transportation | 85 | 25 |
| Loans | 150 | 60 |
Using the table above, calculate the:
(a) Balance of trade;
(b) Invisible trade balance;
(c) Balance on current account.
Answer Details
Visible (merchandise) trade covers physical goods; invisible trade covers services and other transfers. All figures are in $ million.
(a) Balance of trade (visible exports minus visible imports): visible exports \(=200+300=500\); visible imports \(=250+400=650\). \[\text{Balance of trade}=500-650=-150.\] This is a trade deficit of $150 million.
(b) Invisible trade balance (invisible receipts minus invisible payments): receipts \(=25+30+25+60=140\); payments \(=50+75+85+150=360\). \[\text{Invisible balance}=140-360=-220.\] This is an invisible deficit of $220 million.
(c) Balance on current account (balance of trade plus invisible balance): \[-150+(-220)=-370.\] The current account has a deficit of $370 million.
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