Question

. The following data ($B) are for the nation of Syldavia. Study the data carefully.

Export of goods	110	Imports of services	60
Exports of services	35	Domestic purchases of foreign assets	5
Imports of goods	145	Receipts of income earned from foreign assets	10
Payments made for income from domestic assets owned by foreigners	12	Remittances received from overseas workers	30
Foreign purchases of domestic assets	15	Inward FDI	30
Outbound FDI	5	Statistical discrepancy	1
Net addition/subtraction to foreign reserves	?

a) Calculate Syldavia’s balance of trade.

b) Calculate Syldavia’s current account balance showing each part of the current account clearly and indicate whether surplus or deficit.

c) Calculate Syldavia’s final balance of payments showing the current account and capital and financial accounts separately and indicate whether there is a net addition or subtraction to the country’s forex reserves and how much this is.

d) If you were the foreign trade minister of Syldavia, where would you focus your attention and why?

Answer 1

(A)

Balance of trade:-The balance referred to as international trade balance. A country that imports more goods and services than it exports in terms of value has a trade deficit.

Formula = The total value of imports minus the total value of exports.
Export Goods    110
Export Services    35
Sum    145
  
Import Goods    145
Import Services    60
  
Sum    205
  
Export -Import =Deficit   
145-205=    -60

Balance of trade can be said to be in Deficit.

(B) Current Account Balance :-
Receipt                Payments   
                  
Export Goods    110            Import Goods    145
Export Services    35            Import Services    60
Payment made for income    12               
Remittance from oversea worker    30               
                  
Sum    187                205
                  
Receipt-Payment=                   
187-205=-18                   
                  
Hence Current account is deficit by -18 $                   

(C)

Balance of payment will be in surplus by $ 27 so equal amount will be added to the countrys reserve .

Balance of payment Receipt (Current +Capital) Payments (Current +Capital) 110 35 Export Goods Export Services Payment made fo

(D)

As a foreign minister of the country i would focus my attention the high balance of trade seficit due to high import , I Will decrease the import so that exports exceeds and balance of trade be in surplus and country become strong .

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