Exam 10: The Balance of Payments

That U.S. charities donate funds to combat starvation in Africa constitutes a debit transaction on the U.S. balance of payments.

On the balance-of-payments statement, dividend and interest income are classified as capital-account transactions.

Because a large number of international transactions fail to get recorded, statisticians insert a residual, known as statistical discrepancy, to ensure that total debits equal total credits.

In the past two decades, the U.S. services balance has generally registered surplus.

Reducing a current account deficit requires a country to:

When all of the debit or credit items in the balance of payments are combined:

According to researchers at the Federal Reserve, the loss of jobs associated with a deficit in the current account tends to be:

Credit (+) items in the balance of payments correspond to anything that:

Table 10.1 gives hypothetical figures for U.S. International Transactions. Table 10.1. U.S. International Transactions Transaction Merchandise imports Military transactions, net Remittances, pensions, transfers U.S. private assets abroad Merchandise exports Investment income, net U.S. government grants (excluding military) Foreign private assets in the U.S. Compensation of employees Allocation of SDR.s Travel and transportation receipts, net Amount (billions of dollars) 110 -5 -20 -50 115 15 -5 25 -5 5 20 -Referring to Table 10.1, the current account balance equals:

Most economists contend that any reduction in the current account deficit is better achieved through increased national saving than through reduced domestic investment.

A surplus on Germany's goods-and-services balance indicates that Germany has sold more goods and services to foreigners than it has bought from them over a one-year period.

Although a net-debtor country may initially benefit from an inflow of savings from abroad, over the long run continued borrowing results in growing dividend payments to foreigners and a drain on the debtor-country's economic resources.

Concerning the U.S. balance of payments, which account is defined in essentially the same way as the net export of goods and services, which comprises part of the country's gross domestic product?

The balance of payments refers to the stock of trade and investment transactions that exists at a particular point in time.

Reducing a current account surplus requires a country to:

If an American receives dividends from the shares of stock she or he owns in Toyota, Inc., a Japanese firm, the transaction would be recorded on the U.S. balance of payments as a:

If the United States government sells military hardware to Saudi Arabia, the transaction would be recorded on the U.S. balance of payments as a:

Current-account transactions include direct foreign investment, purchases of foreign government securities, and commercial bank loans made abroad.

Although the United States has realized merchandise trade deficits since the early 1970s, its goods-and-services balance has always registered surplus.

Table 10.3 shows hypothetical transactions, in billions of U.S. dollars, that took place during a year. Table 10.3. International Transactions of the United States Transaction Allocation of SDRs Changes in U.S. assets abroad Statistical discrepancy Merchandise imports Payments on foreign assets in U.S. Remittances, pensions, transfers Travel and transportation receipts, net Military transactions, net Investment income, net Merchandise exports U.S. government grants (excluding military) Changes in foreign assets in the U.S. Other services, net Receipts on U.S. investments abroad Compensation of employees Amount (billions of dollars) 10 100 -15 -400 -20 -60 30 -10 100 350 -20 190 80 30 -10 -Refer to Table 10.3. The "net exports" component of the U.S. gross domestic product registered $-110 billion.