2. How would you classify each of the following transactions with regard to Aust

Question

2. How would you classify each of the following transactions with regard to Australian balance- of-payments accounts? (Hint: consider the components of the balance of payments accounts) a. Payment of $100 million in welfare benefits to Australian citizens living in New Zealand b. A sale of a Picasso by a French owner to an Australian resident c. Tuition receipts of S3 billion received by Australian universities from Asian students d. Sale of a 1,000 million Eurobond issue in London by BHP Billiton. c. Investment of MYR 200 million by Harvey Norman's Malaysian subsidiary in Thailand.

Explanation / Answer

a) It shall have a negative effect on balance of payment by negative effect on current account

b)It shall also have a negative effect by having a negative effect on current account

c)Positive effect on BoP due to a positive effect on current account

d)Positive effect due to a positive effect on financial account

e)Negative effect on BoP due to a negative effect on Financial account.

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