Show how each of the following would affect the U.S. balance of payments. Include a description of the debit and credit items, and in each case identify which specific account is affected (e.g., imports of goods and services, IM; exports of assets, EXA; and so on. (a) A U.S. airplane manufacturer imports $600,000 in parts from a Canadian firm. It uses a U.S. bank account to pay for the parts. (b) The Bank of England (U.K. central Bank) buys $2 million in U.S. Treasury bonds from an American securities firm. (e) A U.S. firm exports $10,000 worth of goods to the United Kingdom, payable in 3 months. Please draw a table like the sample image (including arrows which indicate the increase or decrease) and explain a bit under the table (if possible, please elaborate a bit more because i want to understand). Thank you so much.
Show how each of the following would affect the U.S. balance of payments. Include a description of the debit and credit items, and in each case identify which specific account is affected (e.g., imports of goods and services, IM; exports of assets, EXA; and so on. (a) A U.S. airplane manufacturer imports $600,000 in parts from a Canadian firm. It uses a U.S. bank account to pay for the parts. (b) The Bank of England (U.K. central Bank) buys $2 million in U.S. Treasury bonds from an American securities firm. (e) A U.S. firm exports $10,000 worth of goods to the United Kingdom, payable in 3 months. Please draw a table like the sample image (including arrows which indicate the increase or decrease) and explain a bit under the table (if possible, please elaborate a bit more because i want to understand). Thank you so much.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Show how each of the following would affect the U.S. balance of payments. Include a description of the debit and credit items, and in each case identify which specific account is affected (e.g., imports of goods and services, IM; exports of assets, EXA; and so on.
(a) A U.S. airplane manufacturer imports $600,000 in parts from a Canadian firm. It uses a U.S. bank account to pay for the parts.
(b) The Bank of England (U.K. central Bank) buys $2 million in U.S. Treasury bonds from an American securities firm.
(e) A U.S. firm exports $10,000 worth of goods to the United Kingdom, payable in 3 months.
Please draw a table like the sample image (including arrows which indicate the increase or decrease) and explain a bit under the table (if possible, please elaborate a bit more because i want to understand). Thank you so much.
Transcribed Image Text:a. A California computer manufacturer purchases a $50 hard disk from a Malaysian company,
paying the funds from a bank account in Malaysia.
Description
Hard disk imported from
Malaysia
Decrease in Malaysian deposits
owned by U.S. firm
BOP Account
CA (↓)
FA (1)
Account (detail) Credit/Debit
-IM (↑), TB (↓) -$50
-IMFA (↓)
+$50
***The purchasing of disk is a debt entry in CA due to import. The reduction in deposits held in
Malaysia decreases the foreign asset held by American is recorded in the FA as a credit entry.
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