Question

Below are hypothetical transactions of the United States during a given year. Figures are in billions of U.S. Dollars. They are not arranged in any particular order. Please note that not all entries may be relevant to calculate the following:

Travel and transportation receipts, NET…….     25

Merchandise imports ………………………..   450

Allocation of SDRs…………………………..    15

Receipts on U.S. investments abroad…………   20

Statistical discrepancy………………………… 40

Compensation of employees………………….. –5

Changes in U.S. assets abroad, NET………… –150

Merchandise exports…………………………   375

Other services, NET…………………………     35

Payments on foreign investments in the U.S..    –10

calculate:

1. The Merchandise Trade Balance
2. The Services Balance
3. The Goods and Services Balance
4. The Income Balance
5. The Unilateral Transfers Balance
6. The Current Account Balance

Answer 1

Solution:

a) Merchandise trade account balance shows that country position of international exchange of goods.

Merchandise trade account = Exports – Imports

=$375 - $450

= -$75.

B) Services account balance It shows country’s imports and exports of services

Services account balance =Travel and transportation, net + Other services, net =

$25 + $35

= $60.

( C) Goods and services account balance shows the position of a country in overall international trade of goods and services.

Goods and services account balance= Merchandise trade account + Services account balance

=-$75+$60

= -$15.

(D) Income account balance= Receipts on U.S. investment abroad + Payments on foreign investment in the U.S. – Compensation of employees

=$20 + (-$10) -$5

=$5

(E) The unilateral transfers account balance includes transfers of goods and services or financial assets between the U.S. and the rest of the world

The unilateral transfers account balance = zero as nothing given.

(F) Current account balance = Goods and services balance + Income balance + Unilateral transfers balance

= - $15 + $5 + 0

= -$10

if there is any doubt please ask In comments

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