Photo AI
Explain the terms Balance of Trade and Balance of Payments - Leaving Cert Business - Question A - 2019
Question A
Explain the terms Balance of Trade and Balance of Payments. Calculate the Balance of Payments figure from the above data. Show your workings. Illustrate what is me... show full transcript
Worked Solution & Example Answer:Explain the terms Balance of Trade and Balance of Payments - Leaving Cert Business - Question A - 2019
Step 1
Explain the terms Balance of Trade and Balance of Payments.
Answer
The Balance of Trade refers to the difference between the value of visible exports—physical goods produced by businesses based in Ireland and sold to foreign countries—and the value of visible imports, which includes physical goods purchased by Irish consumers from foreign businesses.
The Balance of Payments, on the other hand, refers to the difference between Total Exports (visible and invisible) and Total Imports (visible and invisible). It essentially represents a country’s overall economic transactions with the rest of the world, encompassing all transactions between residents and non-residents during a specific period.
Step 2
Calculate the Balance of Payments figure from the above data. Show your workings.
Answer
To calculate the Balance of Payments, we first sum the Total Exports and Total Imports based on the provided data:
- Total Exports = €55 billion (Goods) + €53 billion (Services) = €108 billion
- Total Imports = €27 billion (Goods) + €86 billion (Services) = €113 billion
Now, we find the Balance of Payments:
Step 3
Illustrate what is meant by the term tariff.
Answer
A tariff is a trade barrier that imposes a tax or duty on goods imported from outside a trading area. Tariffs increase the price that producers charge to encourage consumers to purchase goods from domestic producers.
For example, the European Union imposes tariffs on certain goods that are imported from countries like China and the USA, effectively making imported goods more expensive compared to local products.