Question

In: Economics

Suppose that during a recent year for the United​ States, merchandise imports were ​$2.2 ​trillion, unilateral...

Suppose that during a recent year for the United​ States, merchandise imports were ​$2.2 ​trillion, unilateral transfers were a net outflow of ​$0.2 ​trillion, service exports were ​$0.3 ​trillion, service imports were ​$0.1 ​trillion, and merchandise exports were ​$1.6 trillion.

The merchandise trade deficit was ? trillion. ​(Enter your response rounded to one decimal​ place.)

The balance on goods and services was ? trillion. ​(Enter your response rounded to one decimal place and include a minus sign if​ necessary.)

The current account balance was ? trillion. ​(Enter your response rounded to one decimal place and include a minus sign if​ necessary.)

Solutions

Expert Solution

Merchandise trade deficit = total value of merchandise imported - total value of merchandise exported = $2.2 trillion - $ 1.6 trillion = $ 0.6 trillion

Total exports of goods and services = $1.6 trillion + $0.3 trillion = $1.9 trillion

Total imports of goods and services = $2.2 trillion + $0.1 trillion = $2.3 trillion

Balance of trade = Total exports- total imports = $1.9 trillion- $2.3 trillion = - $ 0.4 trillion

So there is a balance of trade deficit of $0.4 trillion.

Current account balance = balance of trade + net income from abroad + net current transfers

In the present case, balance of trade = - $0.4 trillion

Net income from abroad = 0

Net current transfers = net inflows of transfer income - net outflows of transfer income = - $ 0.2 trillion

Current account balance = - $0.4 trillion + 0 - $0.2 trillion = - $0.6 trillion

Therefore, there is a balance of trade deficit of $0.6 trillion.

Rahul Sunny answered 2 years ago
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