Question

Question Set 5: Current and Financial Account The table below details current transactions and payments accounts...

Question Set 5: Current and Financial Account

The table below details current transactions and payments accounts categories:

Transaction

Current/Financial Account

Increase/Decrease

A Chinese company buys equipment produced in the United States.

A citizen of Canada donates $1000 to victims of Tropic Storm Cindy.

A U.S. citizen buys Boursin cheese produced in France.

A Mexican citizen buys 100 shares of Micron stock.

U.S. investors buy a golf course in Ireland.

Consider each of the transactions above and do the following:

Identify how the transaction is categorized in the U.S. balance of payments accounts.

Identify whether the transaction would be counted as part of the balance of payments in the current account or the financial account.

Identify whether the transaction will increase or decrease the relevant account

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Answer #1
Transaction Current/Financial Account Increase/Decrease
A Chinese company buys equipment produced in the United States. Current account Increases (exports)
A citizen of Canada donates $1000 to victims of Tropic Storm Cindy. Financial account Increases (inflow)
A U.S. citizen buys Boursin cheese produced in France. Current account Decreases (imports)
A Mexican citizen buys 100 shares of Micron stock. Financial account Increases (inflow)
U.S. investors buy a golf course in Ireland. Financial account Decreases (outflow)
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