Question

Balance of trade equals

• A. Exports less imports
• B. Exports of goods less imports of goods
• C. Exports of services less imports of services
• D. None of these

Hint:

Balance of trade is strictly the goods (visible) component of the current account, separate from services.

Answer 1

The Correct Option is B

Step 1: Understanding the Question:
Balance of Payments has two main accounts: the Current Account, which is further split into the Balance of Trade (visible/merchandise trade) and the Balance of Invisibles (services, transfers, income).

Step 2: Why option B is correct:
By definition, the balance of trade (also called the trade balance or balance of visible trade) covers only physical, tangible goods: exports of goods minus imports of goods.

Step 3: Why option A is wrong:
A generic "exports less imports" without specifying goods is ambiguous and, if it includes services, actually describes the current account balance, not the narrower trade balance.

Step 4: Why option C is wrong:
Exports of services minus imports of services is the balance on invisibles (specifically the services component), which is a separate account from the balance of trade.

Step 5: Why option D is wrong:
Since option B is precisely correct, "none of these" cannot be right.

Final Answer:
Balance of trade = exports of goods less imports of goods.