This question has 5 parts (a-e) worth 2 points each for a total of 10 points. Fo
ID: 2429393 • Letter: T
Question
This question has 5 parts (a-e) worth 2 points each for a total of 10 points. For each, write the letter and your answer on a separate row. Show your work (e.g., 1+2 = 3)
The table contains data for the U.S. balance of payments in a give year. All figures are in billions of dollars.
Foreign purchases of US assets
-520
Goods imports
- 2,260
Service imports
- 487
Net investment income
+209
Service exports
+712
Goods exports
+1,398
Balance on the capital account
+13
Net transfers
-86
US purchases of assets abroad
+1,021
Calculate the following:
a. The balance on goods and services.
b. The current account balance.
c. The capital and financial account balance.
d. The overall balance.
e. (unrelated to a-d) Explain why the Mexican government might want to intervene in currency markets to depreciate its own currency, the peso, against the US dollar (the currency of its largest export market).
Foreign purchases of US assets
-520
Goods imports
- 2,260
Service imports
- 487
Net investment income
+209
Service exports
+712
Goods exports
+1,398
Balance on the capital account
+13
Net transfers
-86
US purchases of assets abroad
+1,021
Explanation / Answer
Ans :
a) balance on goods and services a service is the difference between exports of goods and services . Therefore
Hence balance on goods and services = $2110 billion of exports of goods and services - $2747 billion of imports of goods and services = $637 billions deficit.
b) current account balance (obtained by adding all the transactions in the current account)
Hence , current account balance = credits of $2024 billion - Debits of $2538 billion = $514 deficit
c) the capital and financial account balance the balance of payments has to balance .in other words the net of the current account balance and the capital and the financial account balancb must be 0 .
Since the current account is -$514 the capital and financial account balance must be +$ 514.
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