Balance of payments: Using the following data for a given year, calculate Item V
ID: 1203277 • Letter: B
Question
Balance of payments: Using the following data for a given year, calculate
Item
Value
Rise in country’s private financial assets abroad
623
Imports of merchandise
782
Investment income, net
-27
Transfers, net
-15
Export of services
504
Rise in foreign private financial assets in the country
580
Exports of merchandise
903
Rise in foreign governments’ financial assets in the country
224
Imports of services
735
Rise in country government’s financial assets abroad
29
(a) The current account balance.
(b) The financial account balance.
Item
Value
Rise in country’s private financial assets abroad
623
Imports of merchandise
782
Investment income, net
-27
Transfers, net
-15
Export of services
504
Rise in foreign private financial assets in the country
580
Exports of merchandise
903
Rise in foreign governments’ financial assets in the country
224
Imports of services
735
Rise in country government’s financial assets abroad
29
Explanation / Answer
CURRENT ACCOUNT BALANCE = EXPORT OF SERVICE + EXPORT OF MERCHANDISE + TRANSFER NET - IMPORTS OF SERVICES - IMPORTS OF MERCHANDISE
= 504 + 903 -15 - 782 - 735 = -125 OR TRADE DEFICIT OF 125.
FINANCIAL ACCOUNT BALANCE = RISE OF GOVERNMENT AND PRIVATE FINANCIAL ASSETS REDUCED BY FOREIGN PRIVATE AND GOVERNMENT HOLDINGS AND NET INVESTMENT INCOME.
= 623 + 29 - 580 - 224 + 27 = 125.
CURRENT ACCOUNT AND FINANCIAL ACCOUNT TOTAL SHOULD BE ZERO.
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