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Author Question: Consider how the United States balance of payments accounts are affected when U.S. banks forgive two ... (Read 75 times)

wenmo

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on: Jun 30, 2018
Consider how the United States balance of payments accounts are affected when U.S. banks forgive two billion in debt owed to them by the government of Argentina.
 
  What will be an ideal response?

Question 2

Define risk aversion and give an example of a risk-averse person?
 
  What will be an ideal response?


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mceravolo

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Reply #1 on: Jun 30, 2018
Answer to Question 1

In this case, the United States makes a two billion dollars capital transfer to Argentina, which should appear as a negative two billions entry in the capital account. The associated credit is in the financial account, in the form of a two billion dollars reduction in U.S. assets held abroad, i.e., a net asset export, and therefore a positive balance of payments entry.

Answer to Question 2

Risk aversion is a characteristic of a person that dislikes risk. An example of this is someone who takes out rental or home insurance to reduce the risk of some kind of catastrophe from happening.


wenmo

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Reply #2 on: Jun 30, 2018
Thank you


mceravolo

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Reply #3 on: Jun 30, 2018
No problemo


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