A New Yorker travels to New Jersey to buy a $100 telephone answering machine. She pays for the machine with a check that the company that sold the machine deposits into its account at a New York bank. How would this transaction show up in the balance of payments accounts of New York and New Jersey? This transaction will show up as debit in the financial account of New York and as credit in the financial account of New Jersey The offsetting transaction will show up as account of New Jersey in the account of New York and as in the

What are some of the main reasons not all countries in the EU have adopted the Euro?

Imagine you are a German investor trying to decide whether to buy American or European bonds. A ten-year bond issued by America’s Treasury today offers about 3%; German bonds return only 1.2%. But buying American means taking a gamble on the euro-dollar exchange rate. You are interested in the return in euros. The bond issued in the US will be attractive only if the extra yield exceeds any expected loss due to swings in currency markets. This thinking explains why the dollar has recently soared against the euro. In July 2022 the dollar reached a one-for-one exchange rate with the euro for the first time since 2002. Is it always true that a currency appreciates in value when the interest rate it offers increases relative to foreign interest rates? Explain.

How would each of the following transactions show on U.S. balance of accounts?20 (i) Payments of $50 million in social security to U.S. citizens living in Costa Rica. (ii) Sale overseas of 1,25,000 Elvis Presley CDs. (iii) Tuition receipts of $3 billion received by American universities from foreign students. (iv) Payment of $1 million to U.S. consultants A.D. Little by a Mexican company. (v) Sale of a $100 million Eurobond issue in London by IBM. (vi) Investment of $25 million by Ford to build a parts plant in Argentina. (vii) Payment of $45 million in dividends to U.S. citizens from foreign companies.