Tom is stuck with his friends on an island that uses coconuts for currency, but

Question

Tom is stuck with his friends on an island that uses coconuts for currency, but they recently discovered Wilson’s Island nearby. Tom’s Island agrees to make only one transaction with Wilson’s Island: It sells a fishing boat to Wilson’s for 15 coconuts. Answer the following questions, assuming that yearly consumption on Tom’s Island equals 500 coconuts, and domestic investments in huts and farm equipment equals 150 coconuts. Instructions: Enter your answers as whole numbers. a. What are net exports for Tom’s Island? coconuts. b. What is the total national savings for Tom’s Island? coconuts. c. Suppose Tom’s Island imports a volleyball net from Wilson’s Island for 5 coconuts. What is the total national savings now? coconuts. d. Now Tom purchases 1 coconut tree on Wilson's Island at a cost of 10 coconuts. What is the balance of payments? (Hint: A coconut tree produces coconuts like a factory produces goods.) coconuts. I got the answers to A, B, and C, I just need help with D!

Explanation / Answer

Since Balance of Payment is the difference in total value between payments into and out of a country over a period.

So, earlier there was just one transaction ,Tom sells a fishing boat to Wilson’s for 15 coconut. So equal values are exchanged, both Island rceives the same value in exchange as it's a trade so BOP is zero

But now, Tom purchases 1 coconut tree on Wilson's Island at a cost of 10 coconuts, So for this purchase nothing in exchange comes to Toms Island as it's n't a Trade but an Investment. So, It;s unilateral flow.

Thus the BOP is 10 Coconuts.

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