9. Balance of payments The following tables show a hypothetical balance of payme

Question

9. Balance of payments The following tables show a hypothetical balance of payments statement for the United States. (Note: All values are in billions of dollars.) Complete the tables by filling in the missing cells. (Hint: Use the negative sign for all debits, and assume that the total balance of payments equals Balance of Payments CURRENT ACCOUNT Debits Credits Balance U.S. Merchandise Exports U.S. Merchandise Imports Balance of Merchandise Trade U.S. Service Exports U.S. Service Imports Balance on Service Trade Balance on Goods and Services Income Receipts of Americans from Abroad Income Receipts of Foreigners in the U.S Net Income Receipts Net Unilateral Transfers Balance on Current Account 160 -704 -272 64 520 28 -640 CAPITAL ACCOUNT Debits Credits Balance Foreign Investment in the U.S. U.S. Investment Abroad Balance on Capital Account 720 -440 Debits Credits Balance OFFICIAL RESERVE TRANSACTIONS U.S. Official Reserve Assets Foreign Official Assets in the U.S. Balance, Official Reserve Account 400 According to the data presented earlier, there is a merchandise trade billion

Explanation / Answer

Here “balance of merchandise trade” = 160-704=(-544).

“US sevice export”, =64 - (-272)=336.

“balance of goods and services”=64-544=(-480).

“income receipts of foreigners in the US” = 28-520=(-492).

“net unilateral transfer” = (-640 -28 +480) = (-188).

“balance in Capital Account” = 720 – 440 = 280.

Total BOP=0, =>(-640) + 280 + Official Reserve. =0, > OFR=360.

So, there is a merchandise trade “deficit” of amount “(-544).

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