Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 5, Problem 1RQ
To determine
To explain:Transaction’s category that appears in current account, current account balance, relationship between net exports and current account balance.
Expert Solution & Answer
Explanation of Solution
The balance of payment account records all the transactions in the different accounts for instance, the current account records the transections related to merchandise, service, income and unilateral transfers accounts. However, the current account balance refers to the sum of all these transactions.
The current account balance and net export are positively related. If the value of net export is lower, then the value of the current account balance will also be lower. However, the negative value of net export will lead to a deficit in the current account balance.
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Students have asked these similar questions
Based on the Balance of Payments in the table below, what is the
statistical discrepancy (with positive or negative symbol)?
Balance of Payments
(1) Exports of goods and services
(2) Goods
(3) Services
(4) Imports of goods and services
(5) Goods
(6) Services
(7) Balance of goods and services
(8) Income receipts on investments
(9) Income payments on investments
(10) Unilateral transfers
(11) Current account balance
(in billions of dollars)
(12) U.S. owned assets abroad
(Change in; Increase is a "-".)
(13) Foreign-owned assets in U.S.
(Change in; Increase is a "+".)
(14) Net financial derivative transactions
(15) Financial account balance
(16) Statistical discrepancy
2,974
870
-2,400
-320
-980
260
20
1,420
-1,600
-250
Examine the summary of the balance of payments of the United States for 2021. Compute and discuss the balance on the current account and its subaccounts. A Summary of the U.5. Balance of Payments for 2021 (in $ billion) Credits Debits Current Account [1] Exports $ 2,596.0 [1.1] Goods 1, 683.0 [1.2] Services 913.0 [2] Imports-53,374.7 [2.1] Goods-2, 663.6 [2.2] Services -711.1 [3] Primary Income 1,214.9-953.0 [4] Secondary income 219.2-376.9 Balance on current account [[1]+[2]+[3]+[4]-674.5 Capital Account 1.3-15.5 Balance on capital account -14.2 Financial Account (excluding official reserves) [5] Direct investment 392.2-182.2 [6] Portfolio investiment 308.9 13.5 [6.1] Equily securities -304.1 223 4 [6.2] Deht securities 481.3-209.9 [6.3] Derivatives, net 131.7 [7] Other Investment 456.4-263.6 Balance on financial account [[5]+[6]+[7]] 725.2 [8] Statistical discrepancies -3.0 Overall balance 33:5 Official Reserve Account -33.5 Source: The U.S. Bureau of Economic Analysis Required: a1.…
Explain how changes in various economic factors affect a country's current account balance.
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