Describe how each of the following transactions affects the U.S. Balance of Paym

Question

Describe how each of the following transactions affects the U.S. Balance of Payments. (Recall that (a) An American company sells several park benches to Spain and receives a money order of (b) Floyd Townsend, of Tampa Florida, buys 5,000.00 dollars worth of British Airlines stock from (c) A French consumer imports American blue jeans and pays with a check drawn on a U.S. bank (d) An American company sells a subsidiary in the United States and with the proceeds buys a e) A billionaire from Russia enters the United States on an immigrant visa (that is, upon entering each transaction gives rise to two entries in the Balance-of-Payments Accounts.) $200,000 Citibank New York, paying with U.S. dollars. in New York French company. the United States she becomes a permanent resident of the United States.) Her wealth in Russia is estimated to be about 2 billion U.S. dollars. (f) A group of American friends travels to Costa Rica and rents a vacation home for $2,500. They pay with a U.S. credit card. (g) The United States forgives debt of $500,000 to Argentina. (h) Houston residents receive medicine, blankets and tentsworth 50 million dollars from Canada for help over hurricane.

Explanation / Answer

(a) Current account = -200,000 (i.e debited)

And Financial account = +200,000 (i.e Credited)

(b) Financial account = -5,000.00 (Debited)

Financial account = +5,000.00 (Credited)

(c) Credit on current account (+)

And Debit on financial account (-).

(d) Creditt on financial account (+)

And Debit on financial account (-).

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