Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 21, Problem 10P
To determine
To classify:
The given items as credits or debits in the US balance of payment accounts.
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1. What is the exchange rate between the U.S. and Germany? Has there been appreciation or depreciation of the U.S. dollar relative to Germany's currency?
2. As a manager, how does this affect your decision to expand into Germany? Will it affect your costs or ability to produce in Germany?
3. Would you recommend your firm expand into Germany? If so, would you produce the product/service in Germany? Would you expand to sell the product/service to a new target market? If you don’t think your firm should expand into Germany, why?
Question 1
Determine which account of the Balance-of-Payments is affected by each of the following transactions and the impact on the market for foreign exchange.
(a) Your older brother who lives in London sends money to pay your tuition.
(b) Some of the tuition money your older brother sends is used to buy a laptop from Amazon.com.
(c) Carnival Cruise Lines pays for half of the cost of building the new cruise pier in your country.
(d) Celine Dion performs at the Jamaica Jazz & Blues Festival.
(e) In order to diversify its asset holdings a local asset management firm, buys shares of Ford Motor Company on the New York Stock Exchange.
Q1-18
In balance-of-payments accounting, the acquisition of a foreign production facility by a Canadian firm is a ________ item in Canada's balance of payments. The deposit of funds in a foreign bank account by a Canadian citizen is ________ item in Canada's balance of payments.
a. debit / a credit
b. debit / also a debit
c. credit / also a credit
d. credit / a debit
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