Question

If the import is growing at an annual rate of 15 % and export is growing at an annual rate of 5 % then percentage increase in trade deficit from 1998-1999 to 2000-01 will be nearest to ?

• A. 290 %
• B. 340 %
• C. 210 %
• D. 150%

Answer 1

The correct option is A

290 %

Initial trade deficit$\approx$ 3449510

Import increases at a rate of 15% every year for 4 years. This means that it's final value will be

$17609863\times {1.05}^4=$ 21404898

Similarly Export increases at a rate of 5% every year for 4 years. This means that it's final value will be

$14160353\times {1.15}^4=$24766545

New trade deficit $\approx$ 3361647

Percentage increase is from 3449510 to 3361647 $\approx$ 290% increase.