Balance of Payments (Billions of dollars) Current Accounts U.S. merchandise exports +70 U.S. merchandise imports -67 Merchandise trade balance U.S. service exports U.S. service imports +70 Services balance +35 Goods and services balance +38 Net investment income from abroad -2 Net unilateral transfers -8 Current account balance Financial Accounts Change in U.S.-owned assets abroad Change in foreign-owner assets in the U.S. -40 +42 Financial account balance Statistical discrepancy -30 Trade balance Suppose an Argentine logging company purchases American-made chainsaws. This would be entered as a item under the section of the U.S. current account. According to the table, the United States is running a trade The current account balance suggests that U.S. current account transactions (exports and imports of goods and services, as well as inflow and outflow of investment income and transfers) created outpayments of foreign currencies from the United States that were the inpayments of foreign currencies to the United States. Any surplus or deficit in one account must be offset by deficits or surpluses in other balance-of-payments accounts. Because the current account is in , the excess of foreign currency held by Americans must either be loaned to foreigners or used to buy foreign stocks or bonds. All of these transactions are then recorded in the account. Since any imbalance in one account automatically leads to an equal, but opposite, imbalance in the other, the balance of payments is always

Item Imports of goods and services Foreign investment in the United States Exports of goods and services U.S. investment abroad Net interest income Net transfers Statistical discrepancy Billions of U.S. dollars 2,561 955 1,853 300 121 -123 66 a. Calculate the current account balance b. Calculate the capital and financial account balance. C. Did U.S. official reserves increase or decrease? d. Was the United States a net borrower or a net lender in 2008? Explain your answer. Based on the exchange rates for the first trading days of 2013 and 2014 shown in the accompanying table, did the U.S. dollar appreciate or depreciate during 2014? Did the movement in the value of the U.S. dollar make American goods and services more or less attractive to foreigners?

Question: How is this likely to affect economies that are heavily dependent on oil imports? a) Decrease in inflation b) Increase in their trade deficits c) Increase in their exports d) Decrease in their current account deficits

eBook Problem 6-03 Consider the following information: Imports Net income from foreign investments Foreign investments in U.S. Government spending abroad Exports U.S. investments abroad Foreign securities bought by U.S. U.S. securities bought by foreigners Purchase of short-term foreign securities Foreign purchases of U.S. short-term securities $244.0 73.4 8.9 4.0 170.7 21.2 5.2 2.5 5.8 8.7 Determine the balance on the U.S. current account and capital accounts. Use a minus sign to enter the amount as a negative value. Round your answers to one decimal place. Balance on current account: $ Balance on capital account: $

US donates made-in-US vaccines to South Africa. How is the transaction recorded on the U.S. balance of payments accounts? debit: net unilateral transfers; credit: merchandise trade debit: merchandise trade; credit: net unilateral transfers debit: merchandise trade; credit: capital and financial account debit: capital and financial account; credit: merchandise trade

Increase in foreign income will _______ net export but depreciation of domestic currency will ________ net export. Increase: Decrease Increase: Increase Decrease: Increase Decrease: Decrease

3. The balance of payments The following table shows a hypothetical balance-of-payments statement for the United States. All figures are in billions of dollars. Complete the table by filling in the missing cells. Balance of Payments (Billions of U.S. dollars) Current Account Goods and Services Exports 200 Goods and Services Imports -280 Trade Balance Income (net) Current Account Balance Capital Account U.S. Capital Inflow U.S. Capital Outflow Capital Account Balance Statistical Discrepancy 98 -62 10 According to the table, the United States is running a trade The net balance of payments equals $ billion.

The following table shows the value of credits and debits in four balance-of-payments accounts in the fictional economy of Moraha. Debits Balance-of-Payments Account (Billions of dollars) 80 30 35 25 Merchandise Services Income Receipts Unilateral Transfers Total 170 Based on the total values of Moraha's debits and credits, there is Moraha. This means that Moraha has a deficit in the Credits (Billions of dollars) 60 20 40 20 140 money flowing out of Moraha to foreign countries than there is account.

US Exports of Goods Imports of Goods Exports of Services Imports of Services Billions USD 22 6 34 21 22 14 -29 Income earned from US owned assets abroad Income paid to foreign assets located in US Net Unilateral Transfers Refer to the above table. With no statistical discrepancy, the capital and financial account balance

18