Question

Balance of Payment

Assume the following items were the only transactions

that took place between the U.S. and the rest of the world during 2013. Please find the Balance on

Merchandise Trade, the Balance on Current Account, the Balance on Capital Account for

the U.S.

a.

A Swiss firm bought $22m worth of US Commercial Paper.

b.

The Chinese bought $35m worth of U.S. beef.

c.

Brazilian visitors spent $42m visiting Orlando Theme Parks.

d.

American investors bought $20m worth of French T-Bills

e.

The U.S. gave Mexico $20m in foreign aid.

f.

Americans invested $35m in German common stocks.

g.

An American bought a factory in India for $55m

h.

A Japanese investor bought a hotel in Florida for $60m

i.

Dell sold $12m worth of computers to Mexico

j.

American banks paid $15m in interest to British investors.

k.

Japanese investors bought $18m worth of U.S. Treasury Bonds.

l.

U.S. residents gave $15m in gifts to their relatives in Argentina.

m.

Americans invested $30m in Italian Certificates of Deposit.

n.

The Germans bought $30m worth of US wheat.

o.

Americans bought $45m worth of Qatari oil.

p.

US investors received $12m in dividend income from Canada.

q.

Fidelity paid $14m for reinsurance to Llyods of London.

Answer 1

The current account consists of transactions of trade of goods and services.

Balance on Merchandise trade is net payments received for exchange of goods overseas.

The capital account consist of transactions of foreign assets and liabilities.

merchandise trade is in surplus with 32 million.

current account has surplus of 48 million.

capital account is deficit of 40 million.