Question

46. The balance of payments (BOP) is a double-entry accounting system, which implies that total debits will always

   equal total credits. Thus, CA + KA + OA must be (if there is no statistical discrepancy)

                  (a) one.                                                                            (b) zero.

                  (c) greater than zero.                                                                      (d) smaller than zero.

where CA = the current account balance, KA = the capital account balance, and OA = the official reserve transactions balance.

47. Suppose the U.S. balance of payments showing the following:

                                    Current-account balance:                        - $200 billion

                                    Capital account balance:                         + $160 billion.

                                    Official reserve transactions balance: + $20 billion

Then, statistical discrepancy (omissions and errors) should be equal to

                  (a) + $20 billion.                                                          (b) - $20 billion.

                  (c) + $40 billion.                                                          (d) - $40 billion

48. The remote cause of the 2008 global economic crisis was provided by

         (a) a global investment surge.                                                               (b) a global investment plunge.

         (c) a global savings glut.                                                                        (d) a global savings shortage.

Answer 1

Solution(46):-

The Balnace of payment is a double entry accounting system, which implies that tolat debits will always equal total credit . Thus CA +KA+OA must be equal to "zero" because sum of all transactions recorded in the balance of payments must be zero.

It is double entry accounting system every entry to an account requires a corresponding and opposite entry to a different account. One of these entries is designated a credit with a positive sign , and the other is designated a debit with a negative sign.So the sum of all credits is identical to the sum of all debits giving a zero net balance of all entries.

So Option( b) is correct answer.