Question

The following data describes the economy of Antarctica in 2050: Item (billions of Antarctica dollars) Imports...

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.

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.

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