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Question 14 I. The interest earned on the holding of US government bonds by foreigners: a....

Question 14

I. The interest earned on the holding of US government bonds by foreigners:

a. would be recorded as a debit (-) in the US capital account

b. would be recorded as a credit (+) in the US current account

c. would be recorded as a debit (-) in the US current account

d. would be recorded as a credit (+) in the US capital account

II. The purchase of US government bonds by foreigners:

e. would be recorded as a debit (-) in the US current account

f. would be recorded as a credit (+) in the US capital account

g. would be recorded as a credit (+) in the US current account

h. would be recorded as a debit (-) in the US capital account

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Answer #1

1. Would be recorded as a debit (-) in US current account

Reason: Since interest income is a unilateral payment flowing out of US, it will be recorded as a debit from current account

2. Would be recorded as a credit (+) in the US Capital account

Reason: This is because money is flowing in US as investment in capital account

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