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IAI Actuarial Core Principles · Business Economics · Importance of international trade

A country's exports are worth Rs 480 crore and its imports are worth Rs 520 crore in goods, with no services trade. Which statement about its position is correct?

The country has a visible trade deficit of Rs 40 crore, because goods exports of Rs 480 crore are less than goods imports of Rs 520 crore. The balance is exports minus imports, so the negative result signals a deficit.

  1. AIt has a visible trade deficit of Rs 40 croreCorrect
  2. BIt has a visible trade surplus of Rs 40 crore
  3. CIt has a visible trade deficit of Rs 1,000 crore
  4. DIt has a current account surplus of Rs 40 crore
  5. It has a balanced visible trade account

Explanation

The balance of trade in goods is exports minus imports = 480 - 520 = -40, a deficit of Rs 40 crore. Adding the two figures gives total trade turnover, not the balance. The current account also includes invisibles and transfers, which are not given.

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