3) Given below is information on all of the entries in Balance of Payments of a

Question

3) Given below is information on all of the entries in Balance of Payments of a hypothetical developing country:

Commodity exports = $28 million

Debt service payments = $1 million

Remittances from abroad = $2 million

Commodity imports = $34 million

Private FDI inflow = $0.5 million

Investment income = $1 million

Based on this information, answer the following questions:

a) What is the value of current account balance? b) What is the value of capital account balance? c) What is the value of cash reserve account?

Explanation / Answer

a. the current balance of the nation is- $27 millions

b. the value of capital account balance is - $15 millions

c. cash reserve account is - $12 millions

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