Question

In 2010, a country imported goods worth $500 billion and exported goods worth $443 billion. It exported services worth $248 billion and imported services worth $330 billion. Payments on investments abroad totaled $199 billion, while returns paid on foreign investments were $125 billion. Unilateral transfers from the country to other nations amounted to $94 billion. What was the country’s current account deficit for 2010?

A. $70 billion

B. $159 billion

C. $142 billion

D. $65 billion

Answer 1

Answer :

The current account balance of a country includes:

• Export and import of goods
• Import and export of services
• Unilateral transfers
• Income payment

Export of goods and services, unilateral transfer from other nations to country and income payments from foreign to country are added in the credit side of current account or they can be summed as total exports.

Import of goods and services, unilateral transfer from country to other nations and income payment from country to foreign are added on the debit side of current account or we can summed as total imports.

• If total imports or debit of a country is greater than exports or credit side, it is called current account deficit.

Current account balance = (export of goods + export of services) – (import of goods + import of services + unilateral transfer from the country to other nations)

   = ($443+ $248) – ($500+$330+$94)

= -$233

So the current account deficit is $233

* foreign investments are part of capital account balance so they will not be calculated in it.

*I think there is some misprints in the options or typing mistake because answer is not matching with the options.

*I have explained the answer in details so that you can clearly understand it.

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