You are given the following information about country\'s international transacti

Question

You are given the following information about  country's international transactions during a year:

Answer the next 5 questions based on this table. Note that the table is not Balance of Payment table.

1. What is trade balance?

2. What is current account balance?

3. What is official settlements balance?

4. Is the country increasing or decreasing its net holdings of official reserve assets?

5. What has happened to the exchange rate value of the dollar in each case?

Analyze the next 4 questions.

Spot rate goes from $1.25/SFr to $1.3/SFr.

Merchandise Exports 600 Merchandise Imports 200 Service exports 60 Service Imports 204 Income flows, net 65 Unilateral Transfers,net -8 Increase in the country's holding of foreign assets, net (excluding official reserve assets) 202 Increase in foreign holding of country's asset, net (excluding official reserve assets) 102 Statistical Discrepancy 4

Explanation / Answer

1)Trade balance= total exports-total imports
=(600+60)-(200+204)=256
2)Current account balance=trade balance+net income from foreigners+net unilatera transfers
=256+65-8=313
3)Offical settlements balance=Current account balance+(FA-CA)
=313+(202-102)=413
4)Official reserves=-(current account+FA+SD)
=-(313+(202-102)+4)=-417

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