Author Question: How are the following transactions entered into the U.S. balance of payments? (a) The U.S. ... (Read 79 times)

formula1 · **on:** Jun 30, 2018

How are the following transactions entered into the U.S. balance of payments?

(a) The U.S. government sends 2,000 worth of food aid to Africa.
(b) A U.S. firm exports 10,000 worth of goods to the United Kingdom, payable in 3 months.
(c) A U.S. tourist in Amsterdam spends 200 for food and hotels.

Question 2

Leontief showed that U.S. exports were capital intensive relative to U.S. imports.

Indicate whether the statement is true or false

LP · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

(a) The United States debits unilateral transfers for 2,000 and credits merchandise exports, also in its current account, for 2,000.
(b) The United States credits merchandise in its current account for 10,000 and debits its short-term capital account for 10,000.
(c) The United States debits the service category (travel) of its current account for 200, and credits its capital account (an increase in foreign holdings of U.S. assets or claims on the United States) for 200.

Answer to Question 2

FALSE