Fin 490

Eun & Resnick 4e

CHAPTER 3 Balance of Payments

Balance-of-Payments Accounting

Balance-of-Payments Accounts

The Current Account

The Capital Account

Statistical Discrepancy

Official Reserve Account

International Finance in Practice: How One Word Haunts Dollar

The Balance-of-Payments Identity

Balance-of-Payments Trends in Major Countries

International Finance in Practice: The Dollar and the Deficit

Summary

MINI CASE: Mexico’s Balance-of-Payments Problem

Appendix 3A: The Relationship between Balance of Payments and National Income Accounting

Balance of Payments Accounting

Balance of payments

a) is defined as the statistical record of a country’s international transactions over a certain period of time presented in the form of a double-entry bookkeeping

b) provides detailed information concerning the demand and supply of a country’s currency

c) can be used to evaluate the performance of a country in international economic competition

d) all of the above

Answer: d - p. 59

1. If the United States imports more than it exports, then

a) The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.

b) One can infer that the U.S. dollar would be under pressure to depreciate against other currencies

c) a) and b)

d) None of the above

Answer: c - p. 59

2. If Japan exports more than it imports, then

a) The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.

b) One can infer that the yen would be likely to appreciate against other currencies

c) a) and b)

d) None of the above

Answer: b - p. 59 There’s no guarantee that the U.S. is Japan’s only trading partner.

3. Generally speaking, any transaction that results in a receipt from foreigners

a) Will be recorded as a debit, with a negative sign, in the U.S. balance of payments

b) Will be recorded as a debit,...