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Find the balance of trade.

Economics

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Answer

C

K 11 000 surplus

Step-by-step solution

5 steps

Here are the solutions to your questions:

Part 7· 2 steps

The balance of trade (or visible trade balance) is calculated as visible exports minus visible imports.

  1. Identify visible exports and visible imports from the table.

    • Visible export = K 45 000 million
    • Visible import = K 34 000 million

  2. Calculate the balance of trade.

    Balance of Trade=Visible export−Visible import\text{Balance of Trade} = \text{Visible export} - \text{Visible import} Balance of Trade=K 45 000−K 34 000\text{Balance of Trade} = \text{K } 45\,000 - \text{K } 34\,000 Balance of Trade=K 11 000\text{Balance of Trade} = \text{K } 11\,000

    Since exports are greater than imports, it is a surplus.

    The correct option is C. K 11 000 surplus.

Part 8· 3 steps

The balance on current account typically includes the balance of visible trade, balance of invisible trade, and net transfers (which include primary and secondary income). However, given the options, it is common in some contexts to refer to the balance of goods and services as the current account balance if net transfers/income are not explicitly included or are assumed to be zero.

  1. Calculate the balance of visible trade (from Q7).

    Visible Balance=K 11 000 surplus\text{Visible Balance} = \text{K } 11\,000 \text{ surplus}

  2. Calculate the balance of invisible trade.

    • Invisible export = K 25 000 million
    • Invisible import = K 30 000 million
    Invisible Balance=Invisible export−Invisible import\text{Invisible Balance} = \text{Invisible export} - \text{Invisible import} Invisible Balance=K 25 000−K 30 000\text{Invisible Balance} = \text{K } 25\,000 - \text{K } 30\,000 Invisible Balance=−K 5 000 (deficit)\text{Invisible Balance} = -\text{K } 5\,000 \text{ (deficit)}

  3. Calculate the balance of goods and services.

    Balance of Goods and Services=Visible Balance+Invisible Balance\text{Balance of Goods and Services} = \text{Visible Balance} + \text{Invisible Balance} Balance of Goods and Services=K 11 000+(−K 5 000)\text{Balance of Goods and Services} = \text{K } 11\,000 + (-\text{K } 5\,000) Balance of Goods and Services=K 6 000\text{Balance of Goods and Services} = \text{K } 6\,000

    This is a surplus. If "Net Transfers" (K 10 000) were included, the current account balance would be K 16 000 surplus, which is not an option. Therefore, the question likely refers to the balance of goods and services.

    The correct option is C. K 6 000 surplus.

Part 9

Net Private transfers being negative means that more money is leaving the country due to private transfers (e.g., remittances sent abroad by foreign workers, or gifts to foreign residents) than is coming in. None of the provided options directly explain why private transfers are negative. However, if we interpret the question as asking for a general explanation of a net outflow in a current account component, we look for an option that describes money leaving the country.

The options describe different types of outflows:

  • A. Government spending overseas (government transfers/spending)
  • B. Money leaving the country from import (visible trade)
  • C. Money leaving the country through government aid (government transfers)
  • D. Money leaving the country through payment of company interest (primary income)

Since "Net Private transfers" refers to money leaving the country as unrequited payments by private individuals, and none of the options directly match this, the question is problematic. However, if forced to choose the best explanation among the given options for a negative balance in a transfer-like component, options A and C are related to transfers, albeit government ones. Option D is income, and B is goods. Without a direct match, it's difficult to select a definitively correct answer. Given the context of multiple-choice questions, there might be an intended answer that generalizes "money leaving the country."

Let's assume the question is broadly asking for a reason for a net outflow in the current account. Option B, "More money is leaving the country from import than coming in," describes a trade deficit, which is a common reason for a current account deficit and represents a significant outflow of money.

The most plausible option, despite the poor fit, is B. More money is leaving the country from import than coming in.

Part 10

Terms of trade improve when a country's export prices rise relative to its import prices. This means the country can buy more imports for the same amount of exports.

The correct option is A. export prices are increasing relative to import prices.

Part 11

The balance of payments is a systematic record of all economic transactions between residents of a country and the rest of the world over a specific period, usually a year. It summarizes all inflows and outflows of money.

Part 12

The balance of trade account records the value of a country's visible exports (goods sold to other countries) and visible imports (goods bought from other countries). It specifically measures the difference between the value of exported goods and imported goods.

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