Question

Show how each of the following would affect the U.S. balance of payments. Include a description of the debit and credit items, and in each case identify which specific account is affected (e.g., imports of goods and services, IM; exports of assets, EX_A; and so on).

a. A California computer manufacturer purchases a $50 hard disk from a Malaysian company, paying the funds from a bank account in Malaysia. (1 mark)

b. A U.S. tourist to Japan sells his iPod to a local resident for yen worth $100. (1 mark)

c. The U.S. central bank purchases $500 million worth of U.S. Treasury bonds from a British financial firm and sells pound sterling foreign reserves. (1 mark)

d. A U.S. owner of Sony shares receives $10,000 in dividend payments, which are paid into a Tokyo bank. (1 mark)

e. The central bank of China purchases $1 million of export earnings from a firm that has sold $1 million of toys to the United States, and the central bank holds these dollars as reserves. (1 mark)

f. The U.S. government forgives a $50 million debt owed by a developing country. (1 mark)

Answer 1