Question

Given the following information, determine the balance on the United States current account and capital accounts...

Given the following information, determine the balance on the United States current account and capital accounts and answer the questions below in EXCEL.

imports $211.5

net income from foreign investments $32.3

foreign investments in U.S. $7.7

government spending abroad $4.6

exports $182.1

U.S. investments abroad $24.7

foreign securities bought by U.S. $4.9

U.S. securities bought by foreigners $2.8

purchase of short-term foreign securities $6.5

foreign purchases of U.S. short-term securities $9.1

Be sure to also answer each of the questions within the spreadsheet. 1) What was the currency outflow (in dollars) on the current account? 2) What was the currency outflow (in dollars) on the capital account? 3) What was the total currency outflow (in dollars)? 4) What was the overall effect of the income from previous foreign investments on the cash outflow caused by the merchandise trade deficit plus government spending? 5) Was there any offsetting currency inflow to cover the direct foreign investments? Please explain your answer. 6) Did the currency that flowed out of the U.S. "disappear"? Please explain your answer. Please explain question 6

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Answer #1

Imports 211.5 - current account outflow

Net income from investment 32.3 - Current acc inflow

Foreign investment in US 7.7 - capital account inflow

Govt spending abroad 4.6 - current accounts outflows

Exports 182.1 Current account inflow

Us investment abroad 24.7 capital account outflow

Foreign securities bought by US 4.9 capital account outflow

US securities bought by foreigners 2.8 capital accounts inflow

Purchase of short term foreign securities 6.5 capital account outflow

Foreigners purchase US Short term sec 9.1 capital accounts inflows

1 216.1$

2 36.1 $

3 252.2 $

4 211.5 -182.1+4.6-32.3 =1.7$

5 foreign investment by  US 24.7

Inflow investments in US 7.7

6 currency outflow on account of current account disappears and on account of capital account stays

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