Question
please help
Consider two fictional economies, one called the domestic country and the other the foreign country. Given the transactions listed below, construct the balance of payments for each country. If necessary, include a statistical discrepancy. The domestic country purchased $I 18 in oil from the foreign country. Foreign tourists spent $22 on domestic ski slopes. Foreign investors were paid $6 in dividends from their holdings of domestic equities. Domestic residents gave $20 to foreign charities. Domestic businesses borrowed $55 from foreign banks. Foreign investors purchased $20 of domestic government bonds. Domestic investors sold $56 of their holdings of foreign government bonds. Domestic Country Balance of Payments ($) Current Account Exports Imports Trade balance Investment income received Investment income paid Net investment income Current account balance Capital Account Net transfers received Financial Account Increase in foreign holdings of domestic assets Increase in domestic holdings of foreign assets Net increase in foreign holdings Statistical discrepancy Foreign Country Balance of Payments ($) Current Account Exports Imports Trade balance Investment income received Investment income paid Net investment income Current account balance Capital Account Net transfers received Financial Account Increase in foreign holdings of domestic assets Increase in domestic holdings of foreign assets Net increase in foreign holdings Statistical discrepancy
Explanation / Answer
current account
Export $22
Import $118
Trade balance (96)
Investment income received 0
Investment income paid $6
Net investment income (6)
current account balance (102)
Capital account
Net transferred received (20)
Financial account
Increase in foreign holding of domestic asset 20
Increase in domestic holding of foreign asset (56)
Net increase in foreign holding 86
Foreign country BoP
Export 118
Import 22
Trade balance 96
Investment income received 6
Investment income paid 0
Net investment income 6
current account balance 102
Capital account
Net transferred received 20
Financial account
Increase in foreign holding of domestic asset
Increase in domestic holding of foreign asset
Net increase in foreign holding
