Question

Suppose the country of Lilliput exported $293 billion worth of goods and imported $473 billion worth of goods in the last calendar year. Macmillan Learning

a. Calculate Lilliput's balance of trade. SA billion

Answer 1

The U.K. merchandise trade deficit and current account balance for 2001 can be calculated by considering the values of exports, imports, income receipts, and income payments. Payments on foreign investment and government transfers are classified as either positive or negative depending on if they were received or made by the country.

Step-by-step explanation:

a. To calculate the U.K. merchandise trade deficit for 2001, we subtract the value of imports from the value of exports: £192 billion (exports) - £225 billion (imports) = -£33 billion.

b. To calculate the current account balance for 2001, we need to consider both goods and services trade, as well as income from abroad and income payments going abroad. The formula is: Exports - Imports + Receipts of income from abroad - Income payments going abroad = £192 billion + £77 billion - £225 billion - £66 billion + £140 billion - £131 billion = -£13 billion.

c. Payments on foreign investment and government transfers are typically classified as income receipts or payments in the current account. In the case of the United Kingdom in 2001, government transfers from the United Kingdom to the rest of the world (£23 billion) count as negative and are subtracted from the current account balance. Payments received by various U.K government agencies (£16 billion) count as positive and are added to the current account balance.