Introduction / Context:
International trade statistics commonly distinguish between visible and invisible exports. Visible exports refer to physical goods that cross borders and can be seen and counted at ports. Invisible exports are less obvious but equally important, especially for modern service oriented economies. This question checks whether learners understand what is meant by invisible export in trade and balance of payments terminology.
Given Data / Assumptions:
- The phrase under consideration is invisible export.
- Options include services and various categories of goods, such as prohibited, restricted and Open General Licence goods.
- We assume familiarity with basic trade and balance of payments concepts.
- The task is to match the term invisible with the correct item among the options.
Concept / Approach:
Invisible exports are transactions that do not involve the movement of physical goods but still earn foreign exchange. Examples include tourism, banking, insurance, information technology services, consultancy and shipping services. These are called invisible because they cannot be seen or counted in customs warehouses in the same way as tangible commodities. Therefore, invisible export refers to export of services, not to prohibited or restricted goods categories.
Step-by-Step Solution:
Step 1: Recall that visible exports are things like cars, machinery, textiles or food items that are physically shipped abroad.
Step 2: Recognise that invisible exports involve activities such as a foreign tourist spending money in the country or an Indian software firm providing services to overseas clients.
Step 3: These are clearly services rather than physical goods.
Step 4: Option a, services, therefore directly corresponds to the idea of invisible exports.
Step 5: Prohibited goods in option b are items that cannot be legally exported at all and so do not define invisible exports.
Step 6: Restricted goods in option c and Open General Licence goods in option d are classifications related to policy controls on physical goods, not invisibles.
Step 7: Option e, smuggled goods, refers to illegal trade that still involves visible movement of goods and is not what economists mean by invisible exports.
Verification / Alternative check:
A quick verification method is to think of tourism earnings or software exports that increase a country balance of payments without any large shipments leaving ports. These earnings are recorded under invisibles in the current account. They clearly involve services and not physical goods. Looking at balance of payments tables in textbooks confirms that invisible export is the export of services and not a special category of goods.
Why Other Options Are Wrong:
Option b is wrong because prohibited goods are not allowed to be exported, so they cannot define the concept. Option c is incorrect since restricted goods are still tangible items and would be classified as visible exports if shipped legally. Option d refers to goods that can be exported or imported freely under an Open General Licence, which again are physical commodities. Option e is wrong because smuggled goods are illegal but visible and are not counted in official statistics of invisible exports.
Common Pitfalls:
Some learners associate the word invisible with illegal activity or hidden goods, which leads them towards smuggled or prohibited items. Others may confuse trade policy terms like restricted or Open General Licence with balance of payments categories. To avoid such mistakes, students should remember that in trade statistics visible means physical goods, while invisible refers to services, income and transfers that are not tangible but still generate foreign exchange.
Final Answer:
In international trade, invisible export refers to the export of services.
Discussion & Comments