Chapter 41, Problem 1CYU

a)

To determine

Impact on type of balance of payments account due to selling of a newly built airplane to country C.

Explanation of Solution

Current account of the balance of payments account will be affected as here airplane is considered as a good which is bought by country C.

Economics Concept Introduction

Balance of Payment: Balance of payment is the recording of transactions that occur with one country and the rest of the world over a financial period. It records the trading of goods and services and transfers payments.

b)

To determine

Impact on the type of balance of payments account as Chinese investors bought stock in B from Americans.

Explanation of Solution

As the Chinese invested In Boeing, so it is an asset that is capital, therefore, the capital account of the balance of payments account is affected.

Economics Concept Introduction

Balance of Payment: Balance of payment is the recording of transactions that occur with one country and the rest of the world over a financial period. It records the trading of goods and services and transfers payments.

c)

To determine

To prove: Impact on type of balance of payments account as Chinese company bought a used airplane from A airlines and ships it to country C.

Explanation of Solution

An airplane is a good which is bought from A airplane. Goods and services are traded and recorded in the current account. So, the current account of the balance of payments gets affected.

Economics Concept Introduction

Balance of Payment: Balance of payment is the recording of transactions that occur with one country and the rest of the world over a financial period. It records the trading of goods and services and transfers payments.

d)

To determine

To prove: Impact on type of balance of payments accounts as Chinese investor bought a corporate jet that will be used to travel around country A.

Explanation of Solution

The C is contributing to the U economy by buying property in the U which is a boost to real estate and a corporate jet which is a business to the aircraft manufacturer. The capital account of the balance of payments gets affected.

Economics Concept Introduction

Balance of Payment: Balance of payment is the recording of transactions that occur with one country and the rest of the world over a financial period. It records the trading of goods and services and transfers payments.