INTERNATIONAL MACRO ECONOMIC & FINANCE CHOOSE OPTION BELOW: 1a.If a Swedish resi
ID: 2496407 • Letter: I
Question
INTERNATIONAL MACRO ECONOMIC & FINANCE
CHOOSE OPTION BELOW:
1a.If a Swedish resident buys shares in a British company paying in British pounds previously collected by the Swedish resident, then according to IMF definitions it should show up in Sweden's
current account as a debit and in Sweden's financial account as a credit.
capital account as a credit and in Sweden's financial account as a debit.
financial account as a debit and in Sweden's financial account as a credit.
current account as a credit and in Sweden's financial account as a debit.
capital account as a debit and in Sweden's financial account as a credit.
1b
According to IMF definitions and variable definitions provided in lecture, if a Swedish firm sells patent rights to a US firm, it should show up in Sweden's balance of payment accounts as
an decrease in FAND.
an increase in KA.
a decrease in CA.
a decrease in KA.
an increase in CA.
Explanation / Answer
1a)
If a Swedish resident buys shares in a British company paying in British pounds previously collected by the Swedish resident, then in this transaction, the capital is transferred from Sweden for investing in British company, so it should be recorded as Debit in its financial account. However because of this investment there must be some implied return from this investment, the return may be capital gain. So this should be recorded as Credit in the Current Account of Sweden.
So the answer will be current account as a credit and in Sweden's financial account as a debit.
1b)
If a Swedish firm sells patent rights to a US firm, Then in this transaction the patent right is transferred from Sweden. Patent right is a Capital asset, so Debit Capital account of Sweden. At the same time as part of Patent right Sweden firm receives money, so it will go to Credit current account of Sweden.
Hence this transaction will show in Sweden's balance of payment accounts as
An Increase in Current Account and a decrease in Capital account.
So answer will be an increase in CA
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.