Question

This question is about the Balance of Payments Accounts. Record each transaction listed below. Make sure to separate the current and the financial accounts The export of wine from California to France for $100 paid for with US dollars that the French importer holds at home in a box. a. b. The import of a BWM for $200 (it's used) from Germany paid for with euros that the American importer held in bank account in Frankfurt. What is the Current Account Balance? What is the Financial Account Balance? Is there a Balance of Payments deficit? A surplus? Now suppose that the importer of the BMW only has $100 worth of euros available, and purchases the remaining $100 worth of euros directly from the Federal Reserve. c. Repeat the recording of the transaction described in parts b. and c. Have the Balance-of-Payments deficit or surplus been affected? Explain.

Answer 1