LDIS, anu assume that the t Balance of Payments CURRENT ACCOUNT Debits Credits B

Question

LDIS, anu assume that the t Balance of Payments CURRENT ACCOUNT Debits Credits Balance U.S. Merchandise Exports 300 .S. Merchandise UImports Balance of Merchandise Trade U.S. Service Exports U.S. Service Imports Balance on Service Trade Balance on Goods and Services Income Receipts of Americans from Abroad Income Receipts of Foreigners in the U.S. Net Income Receipts Net Unilateral Transfers Balance on Current Account -240 60 252 -204 48 108 390 369 21 -498 -369 Balance Debits Credits CAPITAL ACCOUNT 540 ment in the U.S

Explanation / Answer

For equilibrium, the balance of payments BOP has to be zero and BOP=current account balance + capital account balance and if this doesn't equal zero, official reserve transaction has to be carried out. So here current account balance is -369 and capital account balance is 210. Thus for equilibrium, the official transaction balance should be -369+210=-159 and hence the debit side on US official reserve equals 300-(-159)=459.

Merchandise trade surplus=Merchandise exports-Merchandise imports=300-240=60

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