Trade-Balance-Assignment-Answers
1. Use
the following information to answer the questions below. Assume that the
capital account is equal to 0.
Net unilateral transfers
|
250
|
Exports of goods and services
|
500
|
Net increase in the U.S. government’s nonreserve foreign
assets
|
30
|
Net increase in foreign ownership of U.S.-based nonreserve
assets
|
400
|
Net increase in U.S. private assets abroad
|
250
|
Invest income received in the United States
|
200
|
Net increase in U.S. ownership of official reserve assets
|
20
|
Imports of goods and services
|
600
|
Net increase in foreign ownership of U.S.-based reserve
assets
|
100
|
Investment income paid abroad by the
United States
|
300
|
a. What
is the current account balance?
b. Does the capital
account equal the current account?
c. What is the
statistical discrepancy?
Answers:
a. The current
account is 500 + 200 - 600 -
300 + 250 = -250
b. The capital account
is 100 + 400 - 20 - 30 - 250 =
200
c. The statistical
discrepancy is –1 ´
(–250 + 200) = –250
2. Look at each of
the cases below from the point of view of the balance of payments for the
United States. Determine the subcategory of the current account or financial
account that each transaction would be classified in, and state whether it
would enter as a credit or debit.
a. The U.S.
government sells gold for dollars.
b. A migrant worker in
California sends $500 home to his village in Mexico.
c. An American mutual
fund manager uses the deposits of his fund investors to buy Brazilian
telecommunication stocks.
d. A Japanese firm in
Tennessee buys car parts from a subsidiary in Malaysia.
e. An American church
donates five tons of rice to the Sudan to help with famine relief.
f. An American
retired couple flies from Seattle to Tokyo on Japan Airlines.
g. The Mexican
government sells pesos to the United States Treasury and buys dollars.
1- Answers:
a. The current
account is 500 + 200 - 600 -
300 + 250 = -250
b. The capital account
is 100 + 400 - 20 - 30 - 250 =
200
c. The statistical
discrepancy is –1 ´
(–250 + 200) = –250
2- Answers:
a. The United States
“exports” official reserve assets; it is a credit in the capital account.
b. A resident of the
United States unilaterally transfers money to a foreign locale; it is a debit
in the current account.
c. There is an
“import” of foreign assets; it is a debit in the capital account under
the category of a net change in U.S. private assets abroad.
d. An American-based
producer imports goods; it is a debit in the current account.
e. There is a
unilateral transfer from the United States to abroad foreign country; it is a debit
in the current account.
f. American residents
purchase a service from a foreign firm; it is a debit in the current
account.