Alpha’s balance-of-payments data for 2012 are shown below. All figures are in bi

Question

Alpha’s balance-of-payments data for 2012 are shown below. All figures are in billions of dollars.

Instructions: Input all amounts as positive values.

a. What is the balance on goods? $ billion (Click to select)surplusdeficit.

b. What is the balance on goods and services? $ billion (Click to select)surplusdeficit.

c. What is the balance on the current account? $ billion (Click to select)surplusdeficit.

d. What is the balance on the capital and financial account? $ billion (Click to select)deficitsurplus.

Suppose Alpha sold $10 billion of official reserves abroad to balance the capital and financial account with the current account.

     Does Alpha have a balance-of-payments deficit or does it have a surplus? (Click to select)SurplusDeficit.

Category Value Goods exports $+ 45 Goods imports – 30 Service exports + 15 Service imports – 10 Net investment income – 5 Net transfers + 10 Balance on capital account 0 Foreign purchases of Alpha assets + 20 Alpha purchases of assets abroad – 45

Explanation / Answer

a. Balance of goods = Export of good minus import of goods = ($45 - $30)billion = $15 billion.

That is there is surplus because the difference in positive.

b. Balance on goods and services = (Export of godds + Export of services) - (Import of goods + Import of services)

Balance on goods and services = ($45 + $15) - ($30 + $10) = $20 billion.

So in this case also there is surplus.

c. Balance on the current account = Balance on goods and services + Net transfers + Net investment income

Balance on the current account = $20 + $10 - $5 = $25 billion.

So there is surplus.

d. Balance on the capital and financial account = (Foreign purchases of Alpha assets - Alpha purchases of assets abroad)

Balance on the capital and financial account = $20 - $45 = - $25 billions.

So there is deficit.

e. Suppose Alpha sold $10 billion of official reserves abroad to balance the capital and financial account with the current account. That means there is a balance of payments deficit of $15 billion for Alpha.

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