Question

# Here are some balance of payments data (without pluses and minuses): Merchandise exports, 100 Merchandise imports,...

1. Here are some balance of payments data (without pluses and minuses):

• Merchandise exports, 100

• Merchandise imports, 125

• Service exports, 90

• Service imports, 80

• Investment income receipts from assets, 110

• Investment income payments on assets, 140

• Transfers from home country to other countries, 10

• Increase in home country’s ownership of assets abroad, 160

• Increase in foreign ownership of assets in home country, 200

• Increase in home reserve assets, 30

• Increase in foreign reserve assets, 35

Find the merchandise trade balance, net exports, the current account balance, the capital account balance, the official settlements balance, and the statistical discrepancy.

Merchandise trade balance =Merchandise Exports-Merchandise Imports = 100 – 125 = -\$25

Net export = Exports-Imports =X – M = (100 + 90) – (125 + 80) = -\$15

Current Account balance = (100 + 90 + 110) – (125 + 80 + 140 + 10) = -\$55

Capital Account balance = 200 – 160 = \$40

Increase in home reserve assets is included in the increase in home country assets, so it is excluded Increase in foreign reserve assets is included in the increase in foreign assets in the home country. The changes in home and foreign reserve assets is used to calculate official settlements balance.

Official settlement balance = 30 – 35 = -5

Statistical discrepancy: Current Account+Capital Account+SD=0

-55+40+SD=0

SD=15