Question

1. Nationals of Nigeria own hotels in Morocco and they transferred $50 milion in profits back to Nigeria in 2019. Nigerian tourists spent $90 milion in Morocco in the same year. On the other hand, Nigerians bought new hotels in Morocco for $160 million in 2019. Enter the above transactions in the appropriate sections of the current account and financial account of the balance of paymets tables of Nigeria and Morocco for 2019. 2. a) Are there foreign direct investments and/or portfolio invetments among the above transactions? Explain your answer. b) Morocco imported oil from Nigearia and paid $2 billion, Nigerian Central Bank bought Morroccan government bonds worth $2 billion. How do you enter these in the balance of payments table of these two countries? Do the above transactions change the official reserve assets of these two countries? Explain. 3. Choose an OECD country in the "National Accounts of OECD Countries provided at the link below. From the "Gross Domestic Product, Expenditure Approach" table, a) Find the value of Net Exports (NX) of that country from 2010 to 2017. b) Can you find the Current Account Balances (CA) of this country from the NX values? If you can find the value of CA. If you can not, explain what additional information you need to find the value of CA. c) Based on the NX value, can you say the country has a goods and services) market equilibrium? Likewise, is this country a borrower from or a lender to the outside world during 2010 to 2017? 4. a) Assuming that NX = CA for the above OECD country, are savings (S) greater than, equal to or less than investments (1) for this country? Explain. b) Do you think the world interest rate (rw) is greater than, equal to or less than the domestic interest rate (c)? Explain. c) What happens to savings (S) and investments () of this country if there is a negative supply shock such as a pandemic?

Answer 1

Answer 1.    Balance of payment (Nigeria)

    as per the year 2019

Particular	Amount(in Million $)
Current account
Income Receipt(Profit)	50
Tourist Spending	-90
Net income flow	-40
Financial Statment
Direct Investment	160

Financial account balance	120

Answer 2 (a)

Yes, there is a foreign direct investment among the above transaction.

Foreign direct investment generally means an investment done in another country with the purpose of controlling ownership in a business in one country by an entity based in other countries.

So, Nigerian nationals are making a foreign direct investment in Morocco with a purpose of expansion of Nigerian entity in the form hotels. And also, Nigerian tourist too gets the benefit of the national entity in a foreign country.

Answer 2(b) Balance of Payment of Nigeria

Particulars	Amount(In Billion $)
Current account
Export of Oil	2
Government Bond	2