The table below shows an extract from balance of payments for country A. Use the...
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)
Explanation
(a) Balance of trade = Export of goods - Imports of goods = $52,000.00 - $40,000.00 = 12,000.00.
(b) Credit items = $52,000.00 + 4,000.00 + $20,000.00 + $2,500.00 + $22,800.00 = $101,300.00.
Debit items = $40,000.00 + .8,000.00 + $5,000.00 + $7,500.00 + $7,000.00 = $67,500.00.
Balance on current account = $101,300.00 - $67,500.00 = $33,800.00.
(c) Credit items = $50,000.00 + $254,000.00 + $221,000.00 = $525,000.00.
Debit balance = $26,000.00 + $289,000.00 + $238,000.00 = $553,000.00.
Balance on capital account = $525,000.00 - 553,000.00 = - $28,000.00.
Balance of payments = Balance on current account + Balance on capital account = ($33,800.00) + ($28,000.00) = $33,800.00 - $28,000.00 = $5,800.00.