Irene Jones, a U.S. citizen, purchases a shirt from Walmart for $10 that Walmart imported from...
Irene Jones, a U.S. citizen, purchases a shirt from Walmart for $10 that Walmart imported from China for $5. How did these transactions change the values of U.S. and Chinese imports and exports and the U.S.–Chinese and Chinese–U.S. bilateral trade balances?
Homework Answers
Ans .)
The import of a $5 shirt by walmart from China is recorded as a debit entry in the Current accout of US balance of payments as US has to pay $5 to China for importing the shirt.
Similarly, the export of a $5 shirt by China to walmart is recorded as a credit entry in the Current accout of China balance of payments as China receives $5 from US for exporting the shirt.
The United States has a trade deficit by $5 as it is importing the shirt.
Similarly, China has the trade surplus by $5 as it is exporting the shirt.
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