Question

Consider the table​ below, which shows current account information for a country. All figures are in billions of dollars.

Exports of goods	3344
Imports of goods	-3945
Exports of services	899
Imports of services	-845
Net unilateral transfers	-67

According to the​ table, the merchandise trade balance for this country is ​$ billion.​ (Enter your response as an​ integer.)

According to the​ table, the current account balance is ​$

​billion, and​ thus, if there is no government​ intervention, the financial account balance must be ​$

billion. ​(Enter your responses as​ integers.)

Answer 1

Solution:-

(a). Merchandise trade balance implies difference between exports of goods and imports of goods.

Exports of goods = $3,344 billion

Imports of goods = $3,945 billion

Calculate the merchandise trade balance -

Merchandise trade balance = Export of goods - Import of goods

Merchandise trade balance = $3,344 billion - $3,945 billion = -$601 billion

The merchandise trade balance for this country is $-601 billion.

(b). The current account balance is given by the formula: Export of goods + Export of services - Import of goods - Import of services + net current transfers

current account balance = exports of good and services-imports + transfers

                                    = $3,344 - $3,945 + 899 - 845 - 67 = - 614

and​ thus, if there is no government​ intervention, the capital account balance must be ​$ -614 billion.