The extract from a country’s balance of payments account is shown below. Item Import ($...
The extract from a country’s balance of payments account is shown below.
| Item | Import ($ 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.
Explanation
(a) Balance of trade = visible exports - visible imports
= $200.00 + $300.00
= $ 500.00 million
Visible imports = $250.00 - $650.00
= - $150.00million
(b) Invisible trade balance = inviible exxports - invisible im ports
Invisible exports = $25.00 + $30.00 + $25 = $80.00 million
Invisible imports = $50.00 + $75.00 + $85.00 = $210.00 million
Invisible = $80.00 - $210.00 = -$130.00
(c) Balance on current account = balance of trade + invisble trade balance
= $150.00 +($130.00)
= $150.00 + $130
= $ 280.00
OR
Total exports - total imports
= $(200 + 300 + 25 + 30 + 25) - $(250 + 400 + 50 + 75 + 85)
= $580 - $860 = - $280