Question

The following table shows the value of credits and debits in four balance-of-payments accounts in the fictional economy of Gamros.

Balance-of-Payments Account	Debits	Credits
	(Billions of dollars)	(Billions of dollars)
Merchandise	60	40
Services	25	10
Income Receipts	45	30
Unilateral Transfers	15	15
Total	145	95

Based on the total values of Gamros’s debits and credits, there is   money flowing out of Gamros to foreign countries than there is flowing into Gamros. This means that Gamros has a deficit in the   account.

Complete the following table based on the credits and debits presented in the previous table.

Term	How to Calculate	Deficit or Surplus	Size of Deficit or Surplus
			(Billions of dollars)
Balance of Trade
Net Exports

Answer 1

The Balance of Trade or net exports is the difference between the value of a country's exports of goods and services and the country's imports for the same. In this example, we have exports as Merchandise + Service = 40 + 10 = 50. Imports are = 60 + 25 = 85

THUS, Balance of Trade = 50 - 85 = -35

The country is running a balance of trade deficit i .e. it is importing more than it is exporting