Question

Calculate the current account balance if a small country exports $200 million in goods and services and imports $160 million, it receives $80 million in foreign aid and private charity (net), it pays $15 million to foreign citizens working locally, and its own citizens earn $36 million abroad.

Answer 1

$141 million.

Step-by-step explanation:

Given: Export= $200 million.

Import= $160 million.

Foreign aid received= $80 million

Payment to foreign citizen= $15 million

Earning from abroad= $36.

Now, computing current account balance.

Total current account=
`(X-M)+NI+NT`

X- export

M-Import

NI-Net income

NT-Net current transfer.

Net income=
`(\textrm{ earning of own citizen working abroad - Payment to foreign citizen})`

⇒ Net Income=
`\$ 36-\$ 15= \$ 21\ million`

∴ Net Income (NI)= $21 million.

Net Transfer (NT)= $80 million.

Current account=
`(200-160)+21+80= \$ 141\ million.`

∴ Current account balance is $141 million.