hw questions on balance of payments for an international finance class

1.(25 points) Use the following information to answer the questions below. Show your work.

Net unilateral transfers

-50 billion USD

Exports of goods and services

500

Net increase in the U.S. government non-reserve foreign assets

30

Net increase in foreign ownership of U.S.-based non-reserve assets

400

Net increase in U.S. private assets abroad

250

Investment income received in the U.S.

200

Net increase in U.S. ownership of official reserve foreign 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 U.S.

300

a.What is the current account balance? Is it deficit or surplus?

b.What is the financial and capital accounts (please combine two accounts) balance? Is it deficit or surplus?

c.What is the statistical discrepancy?

2.(55 points) Look at each of the cases below and determine whether each transaction would be classified under the U.S. current account, financial, or capital account, and state whether it would enter as a credit or debit.

  • The U.S. government sells gold for dollars.
  • The Federal Reserve purchases pound sterling foreign reserves in Britain.
  • A California computer manufacturer purchases a $50 hard disk from a Malaysian company.
  • A foreign owner of Apple shares deposits $10,000 in dividend payments into a New York bank.
  • The U.S. government forgives a $50 million debt owed by a developing country.
  • The Mexican government sells pesos to the U.S. Treasury and buys dollars.
  • A Japanese automobile firm builds an assembly plant in Kentucky.
  • A U.S. college student spends a year studying in Switzerland.
  • American charities donate food to people in drought-plagued Africa.
  • Lloyds of London sells an insurance policy to a U.S. business firm.
  • A Swiss resident receives dividends on her IBM stock.