Exam 10: the Balance of Payments

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.

On the U.S.balance of payments,the following transactions are debits,leading to payments to foreigners: merchandise imports,travel expenditures,gifts to foreign residents,and overseas investments by U.S.residents.

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 -Refer to Table 10.3.The services balance registered a surplus of $100 billion.

Rapid growth of production and employment is commonly associated with large or growing trade surpluses and current account surpluses.

Which balance-of-payments item does not directly enter into the calculation of the U.S.gross domestic product?

For the United States,merchandise trade has generally constituted the largest portion of its goods-and-services account.

Concerning the balance of payments,a current-account deficit results in a worsening of a country's net foreign investment position.

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 balance of payments,the statistical discrepancy is used to:

Unlike the balance of payments,the balance of international indebtedness indicates the international:

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

Most economists belief that in the 1980s,a massive outflow of capital caused a current account deficit for the United States.

Concerning the balance of international indebtedness,when is a country a net creditor or a net debtor?

What does a current account deficit mean?

Because the balance of payments is a record of the economic transactions of a country over a period of time,it is a "flow" concept.

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 -Refer to Table 10.3.The "net exports" component of the U.S.gross domestic product registered $-110 billion.

How do we measure the international investment position of the United States at any point in time? How did the U.S.become a net debtor nation so rapidly?

On the U.S.balance-of-payments statement,the following transactions are credits,leading to the receipt of dollars from foreigners: merchandise exports,transportation receipts,income received from investments abroad,and investments in the United States by foreign residents.

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.

In the balance-of-payments statement,statistical discrepancy is treated as part of the merchandise trade account because merchandise transactions are generally the most frequent source of error.