Question

Table 1 Transaction Balance of Payments Transactions (Year 2022) number Amount 1 Interest paid by a Country B's corporat...


6.

 

Transcribed: Table 1 Transaction Balance of Payments Transactions (Year 2022) number Amount 1 Interest paid by a Country B's corporation on a bond owned by a Country A's bank $1,000 2 Interest paid by Country A's government on a treasury bills owned by Country B's govermment $2,000 3 Country A imports of coffee from Country B $4,000 4 Country A's citizen donation to a Non-Govemmental-Organization located in Country B $4,000 5 Wages of workers from Country C paid by corporations located in Country B $4.000 6 Country B'a export of shoes to Country C $6,000 7 Purchase of Country F's goverment bonds by Country B's investors $19,000 8 Sale of Country B's government bonds to Country A's investors $10,000 What is Country B's Trade Balance? Mak Saue AR Anevere to raue all ansrers

Answer

The difference between the value of a nation's net imports and net exports over a particular time interval is referred to as the balance of trade (BOT), sometimes known as the trade balance . 

A trade surplus is indicated by a positive trade balance, whereas a trade deficit is indicated by a negative trade balance. The BOT is a crucial factor in defining a country's current account balance.. 

 

there are two account in BOP 

1. Current account 

a. visible item ( export and import of only goods )

b. invisible items ( export and import of only services ) 

c. unilateral transfers ( donations , gifts, grants etc ) 

d. factor income earned ( wages , interest , dividend etc) 

NOTE : only visible and invisible items is considered in trade balance .

 

2. Capital account 

a.  borrowings and lending 

b. FDI and FIIs

c. disinvestment etc . 

Note : no items of capital account is a part of trade balance . 

trade balance = value of  exports - value of  imports 

here exports and imports mean of goods and services. 

Country B trade balance as follows 

export of goods and services = country A import of coffee from country B (EXPORT) +country B exports of shoes to country C . 

total value of export = $4000+$6000

 Export = $10,000

there is no import made by country B 

therefore Import = 0 

 

trade balance = export - import of goods and services 

 trade balance = 10,000 - 0 

= $10,000 is the answer  

1st transaction is not a part of visible and invisible items  . it includes in factors income paid (interest) by country B . but it will not included in calculation . 

 

same as in 2nd transaction 

4th transaction is fall under unilateral transfer ( donations ) it also will not be included in calculation of trade balance . 

5the transaction is also not a part of trade balance rather it falls under factors income (wages ) 

7the transaction is not a part of trade balance because it is included in capital account ( as financial investment or FIIs). 

8the transaction is alo not a part of trade balance . it is part of capital account 

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