The table below shows the composition of exports and imports of a hypothetical country. Use...
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.
| Exports | Amount $ | Imports | Amounts $ |
| Crude Oil | 120,000,000 | Rice and Flour | 140,000,000 |
| Groundnuts | 40,000,000 | Petroleum Product | 80,000,000 |
| Tourism | 45,000,000 | Vehicles and Accessories | 50,000,000 |
| Shipping & Insurance | 60,000,000 | Banking Services | 60,000,000 |
| Bauxite | 80,000,000 | Freight and Insurance | 40,000,000 |
(a) Calculate the value of visible exports.
(b) Calculate the balance of trade for the country.
(c) List the items of invisible exports and imports.
(d) Calculate the current account balance of the country.
(e) Is the country developed or developing? Give one reason for your answer.
Explanation
(a) Value of visible exports = Crude Oil + Groundnut Oil + Bauxite
= $120,000,000 + $40,000,000 + $80,000,000
= $240,000,000
(b) Balance of trade = total value of visible exports - total value of visible imports
Visible exports = $240,000,000
Visible imports = rice and flour + petroleum product + vehicles and accessories
= $140,000,000 + $80,000,000 + $50,000,000
= $270,000,000
Therefore, Balance of trade = $240,000,000 - $270,000,000
= - $30,000,000
(c) Invisible imports include tourism, shipping and insurance.
Invisible imports include banking services and freight and insurance
(d) Current account balance = value of total exports - value of total imports
= $345,000,000 - $370,000,000
= -$25,000,000
(e) The country is a developing one. This is because;
(i) Its exports are made up mainly of unprocessed primary products.
(ii) Its imports are made up mainly of finished goods.
(iii) The value of imports exceeds exports.