Balance of trade involves the exchange of

Analyze the question: It asks what the "balance of trade" covers, meaning which items are counted when comparing a country's exports and imports.

Explain the concept: In Economics, there is an important distinction:

• Balance of trade (BOT): the difference between the value of a country's visible exports and visible imports. Visible items are physical goods such as cocoa, crude oil, cars and machinery.
• Balance of payments (BOP): a wider record of all transactions with the rest of the world. It includes goods, services (invisibles such as shipping, banking, insurance and tourism), and capital transfers.

Step-by-step solution:

1. Balance of trade = Value of visible exports − Value of visible imports.
2. Visible items are tangible goods only.
3. Services (B and C) are called invisible trade and belong to the current account of the balance of payments, not the balance of trade.
4. Capital movements (D) also belong to the balance of payments, in the capital account.
5. So the balance of trade involves goods only.

Note: Some textbooks loosely say "goods and services", but the standard WASSCE definition of balance of trade is visible trade (goods) only.

Correct answer: A. goods only

Exam tip: Remember "Trade = Tangible." Balance of Trade covers Tangible goods only. Balance of Payments covers Plenty: goods, services and capital.