Question

The following data describes the economy of Antarctica in 2050:

Item	(billions of Antarctica dollars)
Imports of goods and services	150
Exports of goods and services	50
Foreign investment in Antarctica	125
Antarctica's investment abroad	55

Calculate the current account balance ____________ and capital/financial account balance __________

Is the country experiencing a balance of payments crisis? Explain.

Answer 1

Current account balance = Exports of goods and services - Imports of goods and services

= $ (50 - 150 ) billions

Current account balance = $ -100 billion. This implies current account deficit.

Capital account balance = Foreign investment in Antarctica - Antarctica's investment abroad

= $ (125 - 55) billion

Capital account balance = $ 70 billion. This implies capital account surplus.

Balance of payment = Current account balance + capital account balance

= $( -100 + 70)

= $ -30 billion.

This implies that the country is experiencing a balance of payments deficit/ crisis.