An example of a transaction that will be a surplus item on the U.S. balance of p
ID: 1205386 • Letter: A
Question
An example of a transaction that will be a surplus item on the U.S. balance of payments is
A.
a tourist from Germany buying a ticket to fly from New York to Chicago on American Airlines.
B.
a gift of wheat from the U.S. government to India.
C.
a French subsidiary's plant in New Jersey purchasing parts from the main plant in Paris.
D.
a U.S. resident purchasing French wine.
An example of a unilateral transfer is
A.
a gift to a relative who lives abroad.
B.
a check received in payment for an import.
C.
SDR payments to world creditors.
D.
gold payments to foreign companies.
Use the table at right. Nation "A" has a balance of trade
A.
deficit of 50.
B.
deficit of 10.
C.
surplus of 10.
D.
surplus of 50.
Nation "A" in Billions of Local Currency
Exports of goods
$50
Net unilateral transfers
minus25
Imports of services
minus20
Official reserve transaction accounts
minus85
Imports of goods
minus100
Exports of services
80
Capital account
100
A depreciation of the U.S. dollar relative to the euro would tend to
A.
increase U.S. exports to Germany.
B.
increase U.S. imports from Germany.
C.
decrease U.S. exports to Germany.
D.
increase both U.S. imports from Germany and U.S. exports to Germany.
Exports of goods
$50
Net unilateral transfers
minus25
Imports of services
minus20
Official reserve transaction accounts
minus85
Imports of goods
minus100
Exports of services
80
Capital account
100
Explanation / Answer
The balance of payments (BoP or BOP) of a country is the record of all economic transactions between the residents of a country and the rest of the world in a particular period (over a quarter of a year or more commonly over a year). These transactions are made by individuals, firms and government bodies.
unilateral transfer is an economic transaction between residents of two nations over a stipulated period of time. Typically, these transactions consist of gift exchanges, pension payments and the like, but they can encompass other goods and services as well.
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