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 | 40,000.00 |
| 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.