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8 How would each of the following transactions show up on the U.S. BOP(Balance of Payments)...

8

How would each of the following transactions show up on the U.S. BOP(Balance of Payments) accounts? Payment of $50 million in Social Security to U.S. citizens living in Costa Rica.

service, debit

net investment income, credit

unilateral transfers, debit

capital account, debit

goods/merchandise, credit
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Answer #1

In BOP, Home Countries record their monetary transactions with the rest of the world. Transactions are either marked as a credit or a debit. In BOP there are three separate categories define to under which different transactions are categorized:

  • Current account,
  • Capital account,
  • Financial account.

Current Account include goods, services, income and current transfers.

Capital account include physical assets such as a building or a factory.

Financial account include assets pertaining to international monetary flows of i.e. business or portfolio investments

Payment of $50 million in Social Security to U.S. citizens living in Costa Ric

This will show up as a net unilateral transfer abroad, which is a deficit on the services account

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