Question

Show how the following transactions are entered in the USAs balance of payment.

(a) An English commercial bank exchanges $400,000 of its dollar balance for
pounds at England’s central bank (4marks)
(b) An English commercial bank buys $400,000 from its central bank with
pounds(4marks)
(c) A Zambian citizen borrows $,2000 from a Zambian bank and uses it to buy
US stocks (4marks)
(d) The USA gives Zambia $300,000 cash aid (4marks)
(e) The USA gives Zimbabwe $5000 worth of food aid (

Answer 1

A) There is no inflow or outflow of money to USA from this transaction ,so this will not entered in BOP of USA.

B)There is no inflow or outflow of money to USA from this transaction ,so this will not entered in BOP of USA.

C) This will add in capital account as debit as loans

D) This will enter as debit in current account as transfer .

E) This will enter as debit in current account as transfer .( may be it is food ,but Zimbabwe is not giving in return anything to USA ,so it is transfer not EXPORTS)