A country exported goods worth Rs 3500 crore whereas, its import of goods amount to be Rs 1900 crore. The export of services were Rs 2200 crore whereas, the import of services were Rs. 1100 crore. What will be the balance of trade?

1600 crore

The correct answer is Option 4: 1600 crore

Balance of trade is the difference between the value of exports and imports of visible items only.  

Balance of trade = Exports of goods - Imports of goods

Balance of trade = 3500 - 1900

Balance of trade = 1600

Services are not part of balance of trade and hence we will not take into account import and export of services while calculating Balance of Trade.

Explanation:

Balance on Current Account has two components:

• ·Balance of Trade or Trade Balance

• ·Balance on Invisibles

Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country in a given period of time. Export of goods is entered as a credit item in BOT, whereas import of goods is entered as a debit item in BOT. It is also known as Trade Balance. BOT is said to be in balance when exports of goods are equal to the imports of goods. Surplus BOT or Trade surplus will arise if country exports more goods than what it imports. Whereas, Deficit BOT or Trade deficit will arise if a country imports more goods than what it exports.

Net Invisibles is the difference between the value of exports and value of imports of invisibles of a country in a given period of time. Invisibles include services, transfers and flows of income that take place between different countries. Services trade includes both factor and non-factor income. Factor income includes net international earnings on factors of production (like labour, land and capital). Non-factor income is net sale of service products like shipping, banking, tourism, software services, etc. "