Calculate the following: 1. Balance of Trade 2. Balance on Current Account 3. Net External Commercial Borrowings 4. Change in reserves.
Answers
1. . A country's trade balance equals the value of its exports minus its imports. Exports are goods or services made domestically and sold to a foreigner.
2.
The current account formula of the Balance of Payment measures the import and export of goods and services and is calculated as the sum of the trade balance, net income, and current transfers. The trade balance is the difference between countries' imports and exports and is the biggest component of the current account.
3. External Commercial Borrowing (ECB), as the expression hints, is the loan/ debt/ borrowings taken by an eligible entity in India for commercial purpose, externally i.e. from any recognized entity outside India. However, these borrowings taken must confirm with norms of the Reserve Bank of India (RBI).
4. The formulas for calculating changes in the money supply are as follows. Firstly, Money Multiplier = 1 / Reserve Ratio. Finally, to calculate the maximum change in the money supply, use the formula Change in Money Supply = Change in Reserves * Money Multiplier.