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Difficulty: MediumForeign Trade Types and Balance of Payments

A nation's annual foreign trade record shows visible merchandise exports of $450 million\$450\text{ million} and visible merchandise imports of $310 million\$310\text{ million}. If the net invisible trade balance for the same accounting year records a deficit of $65 million\$65\text{ million}, what is the country's overall Current Account balance in millions of dollars?

Answer: 75 million dollars

Answer

The Current Account balance is $75 million (a surplus of 75 million dollars).
The Current Account balance is determined by adding the net invisible balance to the visible balance (Balance of Trade). The visible balance is $450 million−$310 million=$140 million\$450\text{ million} - \$310\text{ million} = \$140\text{ million}. Subtracting the invisible deficit of $65 million\$65\text{ million} results in a Current Account surplus of $75 million\$75\text{ million}.

Step-by-Step Solution

1
Calculate the Balance of Trade (visible balance)
450million−450 million - 310 million = $140 million surplus
Balance of Trade includes only visible merchandise goods exported and imported.
2
Add the net invisible trade balance to the Balance of Trade
140million+(−140 million + (- 65 million) = $75 million surplus
The Current Account balance aggregates visible trade (Balance of Trade) and net invisible transactions such as services, income, and unrequited transfers.

Key Concept

Current Account Balance Calculation
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Topics

Foreign Trade Types and Balance of Payments

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