For each of the following changes, other things equal, has the value of the coun

Question

For each of the following changes, other things equal, has the value of the country’s current account balance increased (become more positive or less negative), decreased, or stayed the same? Briefly justify your answer.

A) Total trade rises but net exports remain the same. Exports of goods and services increase by $10 billion and imports of goods and services increase by $10 billion

B) To assist recovery from a foreign disaster, the country gives the foreign government trucks and other transportation equipment products in the donor country that is valued at $500 million.

Explanation / Answer

A. Stay the same

As there is no Net change in the Exports, so the current account will be balanced

B. Decreased

As foreign Aid of $500 Million is provided , for which nothing is recieved , so it is one side transfer of funds from home country to foriegn country and hence current Balance decreases.

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