2. Identify the following transactions as credits (+) or debits (-) in the Canad

Question

2. Identify the following transactions as credits (+) or debits (-) in the Canadian Tent account (CA) or financial account (FA). Values are denoted in Canadian dollars. CA or FA Credit or Debit Canadian firms export $250 million worth of goods. Canadian citizens buy 850 worth of airplane tickets on US airlines A Canadian firm purchases a ski resort in Colorado for 830 million Canadian citizens deposit $15 million in a Chase bank account in New York Canada imports $220 million worth of goods Canadian firms borrow $45 million by issuing bonds in the US Canada's central bank buys $10 million in US treasury bills A Canadian billionaire buys the Denver Broncos for $1 million, but keeps the team in Denver Based on the current account numbers that you calculated above, does Canada run a current account deficit or surplus? And based on your assessment of Canada's current account being in deficit or surphas, is Canada a net borrower or lender from the rest of the world?

Explanation / Answer

Current difference 250 - 251 millions

Current Account Deficity ( Inflow - Outflow)

2. Based on the calculations, Canadian BOP shows 1 million Current account deficit which is calculated by adding the debit balance of 220+50+1 = 271 and subtracting the credit balance of 250.

Current account deficit 250-271 = 21

3. The current account of canada shows deficit and therefore it can be concluded that canada is a net borrower from the rest of the world to balance the current account deficits.

Particulars CA/FA Debit/Credit Canadian firms export 250 million worth of Goods CA 250 M Credit Canadian Citizens buy 50 worth of airplane tickets on US airlines CA 50 Debit Canadian Imports 220 million worth of Goods CA 220 Debit A canadian Billionaire buys the Denver Broncos for 1 million, but keeps the team in denver CA 1 Debit

Current difference 250 - 251 millions

Current Account Deficity ( Inflow - Outflow)

21 million Financial Account A canadian firm purchases a ski resort in colorado for 30 million FA 30 (Debit) A canadian Citizens deposit 15 million in a chase bank account in New York FA 15 (Debit) Canadian firms borrow 45 million by issuing bonds in the US FA 45 (Credit) Canada cetral bank buys 10 million in US treasury Bills FA 10 (Debit) Financial account difference ( 55- 45) deficit 10 million

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