Please refer to the hypothetical information below to determine the international investment position of the United...
Please refer to the hypothetical information below to determine the international investment position of the United States. Is the United States a net creditor nation or a net debtor nation? By what amount? Briefly explain.
Hypothetical International Investment Position of the United States (in billions of U.S. Dollars), entries are in no particular order:
Foreign official assets in the United States……………….. 25
U.S. private assets abroad…………………………………. 75
Other foreign assets in the United States………………… 225
U.S. government assets abroad…………………………… 150
Homework Answers
Calculate Total Assets owned by foreigners in the United States -
Total assets owned by Foreigners = Foreign official assets in the United States + Other foreign assets in the United States
Total assets owned by Foreigners = $25 billion + $225 billion = $250 billion
The total assets owned by foreigners in the United States is $250 billion.
Calculate Total Assets owned by United States abroad -
Total assets owned by United States abroad = U.S. private assets abroad + U.S. government assets abroad
Total assets owned by United States abroad = $75 billion + $150 billion = $225 billion
The total assets owned by United States abroad is $225 billion.
When foreign owned assets in a country are greater than the country owned assets abroad then country is a net debtor nation.
On the other hand, when foreign owned assets in a country are less than the country owned assets abroad then country is a net creditor nation.
In the given case, total assets owned by foreigners in the United States are greater than the total assets owned by United States abroad by $25 billion.
So,
United States is a net debtor nation by $25 billion.
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