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UI Post-UTME Economics 2025 (Model questions) Question 13

Question 13

Balance of Payments and Exchange Rates

The balance of payments of Country X shows the following: Merchandise exports: $500m Merchandise imports: $620m Net services: $40m Net transfers: −$20m. Which of the following is TRUE?
I. The trade balance shows a deficit of $120m
II. The current account balance is −$100m
III. Invisible trade balance is $20m
IV. The current account is in surplus

  1. A.I, II and III only
  2. B.I and IV only
  3. C.II and III only
  4. D.I, III and IV only
Show the answer and explanation

Answer: A (I, II and III only)

Explanation

Trade balance = 500 − 620 = −$120m. Invisibles = 40 − 20 = $20m. Current account = −120 + 20 = −$100m, a deficit, so IV is false.