Question

The U.S. owns more assets abroad than foreigners own in the U.S. O True OFalse Save Question 10 (3 points) Which of the following is included in the current account? O Interest payments Gifts Import of services All of the above Save Question 11 (3 points) Identify the following transaction by whether they belong in the U.S. current account or financial account, and also whether they enter positively (contributing to a surplus in that account) or negatively) The (American) author of your textbook earns royalties on sales in Finland Debit in Current Account Credit in Current Account Debit in Financial Account Credit in Financial Account

Answer 1

9. By the end of second quarter 2018, the net investment position was negative. Thus, the investment outflows were higher than the inflows as per BEA data. So, the US owns more assets abroad. So, Yes.

10. Current account includes the trade in goods and services of an economy. Thus, the import of services is thus included in current account. The gifts and the interest payments are the transfer payments as they are not generating any output, but shall be included in the current asset as the payment is being made to the foreigners. Thus, all of the items are included in current account. (d)

11. Current account deals with goods and services traded across country. An American author earn royalties on sales in Finland is the payment which the Author is receiving for his service which here is book. Since this is money received, thus it will be recorded as a credit in current account.