Question

2(a)-(c) [SECTION A — Compulsory] The extract from a country's balance of payments account is shown below (all figures $'million):
Item — Import | Export
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.

Accepted Answer

(a) Balance of trade = Visible Export − Visible Import.
  Visible Export = Agricultural products (200) + Mineral products (300) = $500 million.
  Visible Import = Consumer goods (250) + Capital goods (400) = $650 million.
  Balance of trade = $500m − $650m = −$150 million.
(b) Invisible trade balance = Invisible Export − Invisible Import.
  Invisible Export = Insurance (25) + Banking (30) + Transportation (25) = $80 million.
  Invisible Import = Insurance (50) + Banking (75) + Transportation (85) = $210 million.
  Invisible trade balance = $80m − $210m = −$130 million. (Loans are treated as a capital-account item and excluded here.)
(c) Balance on current account = Balance of trade + Invisible trade balance = (−$150m) + (−$130m) = −$280 million.

WAEC Economics 2019 Theory — Question 2

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