Balancing the current account using trade and income components

Steps:

• Calculate X (balance of trade in goods) = exports of goods - imports of goods = 52,000 - 54,700 = -2,700.
• Apply current account formula: current account balance = X + Y + primary income balance + secondary income balance.
• Substitute known values: -500 = -2,700 + Y - 600 + 8,000.
• Solve for Y: Y = -500 + 2,700 + 600 - 8,000 = -5,200.

Why C is correct:

• Option C (X = -2,700, Y = -5,200) satisfies the current account balance equation, where the sum of all components equals -500 as per the balance of payments identity.

Why the others are wrong:

• A: Y = 5,200 yields current account surplus of 7,400, not -500.
• B: X = 2,700 miscalculates goods trade (exports < imports), yielding surplus of 13,100.
• D: Y = -2,000 yields current account surplus of 3,700, not -500.

Final answer: C