Question

Which of the following is NOT included in the U.S. current account? A. U.S. unilateral transfers...

Which of the following is NOT included in the U.S. current account?

A. U.S. unilateral transfers to foreigners.

B. U.S. foreign direct investment abroad.

C. Interest paid by the U.S. on bonds held by foreigners.

D. U.S. compensation received by foreigners.

E. U.S. exports.

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Homework Answers

Answer #1

Current Account Formula = (X-M) + NI + NT

Current account =export of goods and services – import of services + Income earned from US owned assets abroad – income paid to foreign assets located in US + Net Unilateral transfer

It means the items included in the US current account are;

US unilateral transfers to foreigners

Interest paid by the US on bonds held by foreigners.

US compensation received by foreigners.

US exports.

But US foreign direct investment abroad in part of capital account not the part of current account.

Hence it can be said that US foreign direct investment abroad is not included in the US current account.

Hence option C is the correct answer.

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