The table below shows an extract from balance of payments for country A. Use the table to answer the questions that follow: Balance of payments items
Items of transaction
Receipts ($)
Payment ($)
1
Merchandise (visible trade)
52,000.00
4,000.00
2
Shipping, other transport and travel
4,000.00
8,000.00
3
Investment income
20,000.00
5,000.00
4
Other services
2,500.00
7,500.00
5
Unrequired transfers
22,800.00
7,000.00
6
Direct investment
50,000.00
26,000.00
7
Other long-term capital
254,000.00
289,000.00
8
Short-term capital
221,000.00
238,000.00
Calculate the: (a) balance of trade (3 marks) (b) balance on current account (8 marks) (c) balance on capital account (6 marks) (d) balance of payment (3 marks)
Explanation
(a) Balance of trade = Export of goods - Imports of goods = $52,000.00 - $40,000.00 = 12,000.00. (b) Credit items = $52,000.00 + 4,000.00 + $20,000.00 + $2,500.00 + $22,800.00 = $101,300.00. Debit items = $40,000.00 + .8,000.00 + $5,000.00 + $7,500.00 + $7,000.00 = $67,500.00. Balance on current account = $101,300.00 - $67,500.00 = $33,800.00. (c) Credit items = $50,000.00 + $254,000.00 + $221,000.00 = $525,000.00. Debit balance = $26,000.00 + $289,000.00 + $238,000.00 = $553,000.00. Balance on capital account = $525,000.00 - 553,000.00 = - $28,000.00. Balance of payments = Balance on current account + Balance on capital account = ($33,800.00) + ($28,000.00) = $33,800.00 - $28,000.00 = $5,800.00.
