International Transaction Account

ADDITIONAL PROBLEMS

1. State whether each of the following transactions represents a credit or a debit in the US Current Account (for now, ignore the second side of each transaction, i.e. use Method I from class to figure out whether the item is a credit or debit).

a. Export of an IBM computer to Canada.

b. A dividend paid to a German owner of IBM stock.

c. Export of military replacement parts to Israel.

d. A U.S. resident's vacation in France.

e. An insurance policy from Lloyds of London sold to an American.

f. Remittance from a Mexican working in the U.S. to his or her family

in Mexico.

1. (a) credit (b) debit (c) credit (d) debit (e) debit (f) debit

2. State whether each of the following represents a credit or a debit in the US Financial Account, and therefore a financial inflow or financial from

the US perspective (for now, ignore the second side of each transaction, i.e.. use Method I from class to figure out whether the item is a credit or debit).

a. Export of a US Treasury Bond to a purchaser in Japan.

b. Shares of Toyota stock on the Tokyo stock exchange exported to an

American buyer.

c. Purchase of a plant in South Korea by IBM.

2 (a) credit/financial inflow (b) debit/financial outflow (c) debit/financial

outflow

3. a. For each of the following hypothetical transactions in the US

Balance of Payments Account, indicate what the credit and debit entries would be if precise accounting records were kept. Assume all checks used to pay for items remain in the country of origin.

i. A US resident imports $500 worth of merchandise from a UK resident and pays by drawing down his bank balance in London.

Category

Credit( +) Debit (-)

Imports of Goods -500

Capital inflow (private) +500

ii. The US government gives a $100 cash balance in a US bank to a developing nation as part of its foreign aid program.

Category Credit( +) Debit (-)

Unilateral Transfers to foreigners -100

Financial Inflow...