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Question

Difficulty: MediumInternational Trade and Commercial Geography

An economic report for a nation lists exported crude oil valued at $12 billion\$12\text{ billion}, imported manufactured machinery valued at $8 billion\$8\text{ billion}, payments made to foreign shipping companies valued at $2 billion\$2\text{ billion}, and revenue received from international tourism valued at $1 billion\$1\text{ billion}. What is the nation's balance of visible trade?

  1. A surplus of $4 billion\$4\text{ billion}Answer
  2. B
    A surplus of $3 billion\$3\text{ billion}
  3. C
    A deficit of $4 billion\$4\text{ billion}
  4. D
    A surplus of $5 billion\$5\text{ billion}

Answer

The nation's balance of visible trade is a surplus of $4 billion\$4\text{ billion}.
The balance of visible trade considers only tangible physical commodities. Subtracting the value of visible imports (manufactured machinery at $8 billion\$8\text{ billion}) from visible exports (crude oil at $12 billion\$12\text{ billion}) yields a trade surplus of $4 billion\$4\text{ billion}. Invisible items such as tourism receipts and shipping charges are excluded.

Step-by-Step Solution

1
Identify visible trade items (tangible merchandise)
Visible exports = crude oil ($12 billion\$12\text{ billion}); Visible imports = manufactured machinery ($8 billion\$8\text{ billion}).
Visible trade accounts exclusively for tangible physical commodities, excluding services such as shipping, insurance, and tourism.
2
Calculate the balance of visible trade
Balance of Visible Trade=$12 billion−$8 billion=+$4 billion\text{Balance of Visible Trade} = \$12\text{ billion} - \$8\text{ billion} = +\$4\text{ billion}.
The visible trade balance equals total value of visible exports minus total value of visible imports.

Key Concept

Visible vs. Invisible Trade Balance
Estimated Time:1m 30s
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Topics

International Trade and Commercial Geography

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