Show your work (e.g., 1+2 = 3) The table contains data for the U.S. balance of p
ID: 2429415 • Letter: S
Question
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
(a)
Balance on goods and services = Goods exort + Services export - Goods import - Services import
= 1,398 + 712 - 2,260 - 487
= - 637
(b)
Current account balance = Balance on goods and services + Net investment income + Net transfer
= - 637 + 209 - 86
= - 514
(c)
Capital/Financial account balance = Foreign purchase of US asset - US purchase of assets abroad
= - 520 + 1,021
= 501
(d)
Overall balance = Current account balance + Capital/Financial account balance
= - 514 + 501
= - 13
NOTE: As per Chegg Answering Policy, first 4 parts are answered.
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