Question

SECTION A — Answer one question only from this section.
1. Extract from balance of payments for country A ($): Merchandise (visible trade): Receipts 52,000, Payment 40,000; Shipping/transport/travel: Receipts 4,000, Payment 8,000; Investment income: Receipts 20,000, Payment 5,000; Other services: Receipts 2,500, Payment 7,500; Unrequited transfers: Receipts 22,800, Payment 7,000; Direct investment: Receipts 50,000, Payment 26,000; Other long-term capital: Receipts 254,000, Payment 289,000; Short-term capital: Receipts 221,000, Payment 238,000.
Calculate the: (a) balance of trade; (b) balance on current account; (c) balance on capital account; (d) balance of payment.

Accepted Answer

(a) Balance of trade (visible trade only) = Receipts − Payment = $52,000 − $40,000 = $12,000

(b) Balance on current account = (visible trade + invisible trade credits) − (visible trade + invisible trade debits)
= $(52,000+4,000+20,000+2,500+22,800) − $(40,000+8,000+5,000+7,500+7,000)
= $101,300 − $67,500 = $33,800

(c) Balance on capital account = (credit items) − (debit items)
= $(50,000+254,000+221,000) − $(26,000+289,000+238,000)
= $525,000 − $553,000 = −$28,000

(d) Balance of payment = balance on current account + balance on capital account
= $33,800 + (−$28,000) = $5,800.00

WAEC Economics 2014 Theory — Question 1

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