Worked Example 1 — Balance of Trade
Question:
Country X has the following data for 2024:
Exports of goods = $150,000
Imports of goods = $200,000
Step 1 — Apply the formula:
BOT=Exports−Imports=150,000−200,000\text{BOT} = \text{Exports} - \
text{Imports} = 150,000 -
200,000BOT=Exports−Imports=150,000−200,000
Step 2 — Calculate:
BOT=−50,000\text{BOT} = -50,000BOT=−50,000
Step 3 — Interpretation:
BOT = –50,000 → Deficit
Explanation: Country X imported more goods than it exported.
3️⃣ Worked Example 2 — Balance of Payments (Current Account)
Question:
Country Y has the following data (2024):
Visible exports = $120,000
Visible imports = $100,000
Invisible exports (tourism, services) = $30,000
Invisible imports = $50,000
Step 1 — Calculate balance of visible trade:
Visible BOT=120,000−100,000=+20,000\text{Visible BOT} = 120,000 -
100,000 = +20,000Visible BOT=120,000−100,000=+20,000
Step 2 — Calculate balance of invisible trade:
Invisible balance=30,000−50,000=−20,000\text{Invisible balance} =
30,000 - 50,000 = -20,000Invisible balance=30,000−50,000=−20,000
Step 3 — Calculate current account balance:
Current account (BOP)=20,000+(−20,000)=0\text{Current account (BOP)} =
20,000 + (-20,000) = 0Current account (BOP)=20,000+(−20,000)=0
Step 4 — Interpretation:
BOP = 0 → Balanced payments
The surplus in visible trade is exactly offset by the deficit in invisible
trade.
4️⃣ Worked Example 3 — Including Capital Flows
Question:
Country Z (2024):
Visible exports = $200,000
Visible imports = $250,000
Invisible exports = $60,000
Invisible imports = $40,000
Net capital inflow = $30,000
Step 1 — Balance of visible trade:
200,000−250,000=−50,000200,000 - 250,000 = -
50,000200,000−250,000=−50,000
Step 2 — Balance of invisible trade:
60,000−40,000=+20,00060,000 - 40,000 =
+20,00060,000−40,000=+20,000
Step 3 — Current account balance:
−50,000+20,000=−30,000-50,000 + 20,000 = -
30,000−50,000+20,000=−30,000
Step 4 — Add capital inflows for overall BOP:
−30,000+30,000=0-30,000 + 30,000 = 0−30,000+30,000=0
Interpretation:
Current account deficit = 30,000
Capital inflows cover the deficit → Overall BOP is balanced.
5️⃣ Quick Tips for Exam
1. Always label surplus/deficit.
2. Show all working clearly. Partial marks awarded for correct steps.
3. Include units ($, £, etc.) in your answer.
4. Distinguish visible and invisible trade.
5. If capital/financial flows are given, include them in the final BOP
calculation.
6️⃣ Mini-Practice Question
Question:
Country A (2024):
Exports of goods = $80,000
Imports of goods = $100,000
Invisible exports = $25,000
Invisible imports = $15,000
Tasks:
1. Calculate the Balance of Trade.
2. Calculate the Balance of Payments (Current Account).
3. State whether each is a surplus or deficit.
