Question

Question: Determine whether or not each of the following transactions constitutes a BOP entry. If a transaction constitutes a BOP entry, indicate whether it can be described as a debit or a credit in the BOP for the U.S. Justify all your responses.

i) Mr. Smith, a resident of Wichita, Kansas in the U.S. buys a new Chevrolet Suburban from a local dealership.

ii) Mr. Smith also buys solar panels from his friend, Mr. Wu, who is a resident of Chifeng, China.

iii) Mr. Smith buys a Hainan Airlines plane ticket for Mr. Wu to come visit him in Wichita. Hainan Airlines is a Chinese rm.

iv) While in Wichita, Mr. Wu buys two tickets to a Wichita State men's basketball game, for he and Mr. Smith.

Answer 1

(i) No , not a BOP entry (This is not a foreign transaction)

(ii) Yes, a BOP entry ; Debit (Mr. Smith does a foreign transaction by paying his friend in China. Hence, an individual has completed a transaction with another individual in a foreign country)

(iii) Yes, a BOP entry ; Debit (Mr. Smith, an individual completes a foreign transaction with a foreign company while paying them)

(iv) Yes, a BOP entry ; Credit ( Mr. Wu a foreigner, completes a transaction by paying an American company. Hence, money is credited to US)