Question

Let's consider the balance of payments

Change in official reserves equals Current Account + Capital Account

a. Current Account= -$20 , Capital Account = +$45 . Calculate the change in reserves

b. Current Account= -$20, Change in Reserves = -$6 Calculate the Capital Account

c. Expenses at College =$24,000. Disposable Income from your job = $8,000 . Calculate your current account? Assuming reserves (i,e. Cash savings ) Calculate the capital account

Answer 1

Change is official reserves = current account + capital account

a. current account= -$20, capital account= $45

therefore change is reserve= - 20 + 45 = $ 25

b. current account= -$20, change in reserves = -$6, capital account = ?

if Change is official reserves = current account + capital account

then -6 = -20 + capital account

-6+20 = capital account

Capital account = $ 14

c. Expenses at college = $24000, Disposable income from the job  = $8000, current  account = ?

Current account = Inflow - Outflow

= 8000 -24000 = $-16000

Assuming reserves as cash savings i. e $ 0 ( since outflow is higher than inflow), capital account = ?

Change is official reserves = current account + capital account

0 = - 16000 + capital account

capital account = $ 16000