Question

Balance of trade is related to

• A. Import of Goods
• B. Export of Goods
• C. Import and Export of Goods
• D. None of these

Hint:

Remember the key distinction: Balance of Trade = Visible items only (Goods). Balance of Payments on Current Account = Visible items (Goods) + Invisible items (Services, Transfers). Balance of Payments = Current Account + Capital Account.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
The Balance of Trade (BoT) is an economic measure that records the difference between the value of a country's exports and the value of its imports for a given period. It is a key component of a country's Balance of Payments (BoP).

Step 2: Detailed Explanation:
\begin{itemize} \item The Balance of Trade specifically deals with the trade in goods, which are tangible and visible items. It does not include trade in services (like tourism or software services) or capital flows. \item The formula is: \[ \text{Balance of Trade} = (\text{Value of Export of Goods}) - (\text{Value of Import of Goods}) \] \item Since the calculation involves both the value of imports and the value of exports, the Balance of Trade is related to both the Import and Export of Goods. \item A positive balance (exports \(>\) imports) is called a trade surplus. \item A negative balance (imports \(>\) exports) is called a trade deficit. \end{itemize}

Step 3: Final Answer:
The Balance of trade is related to the Import and Export of Goods.