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EC140 Chapter Notes - Chapter 35: Reserve Currency, Capital Account, Canadian Dollar

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oliveoyster27
13 Apr 2016
School
WLU
Department
Economics
Course
EC140
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All

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EC140 Full Course Notes
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Document Summary

Chapter 35: exchange rates and the balance of payments. Balance of payments accounts: summary record of a country"s transacions with the rest of the world. Current account: records payments and receipts arising from trade in goods and services, and from interest and dividends that are earned on assets owned in one country and invested in another. Trade account: in the balance of payments, this account records the value of exports and imports of goods and services: tourism contributes a large part to this secion. Capital-service account: in balance of payments, this account records the payments and receipts that represent income on assets (interest and dividends) Capital account: records payments and receipts arising from the purchase and sale of assets. When canadians purchase foreign assets, inancial capital is leaving canada thus being called a capital ouflow, vice versa is called capital inlow.

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Related Questions

QUESTION 10

Below is a table for the Balance of Payments of Goegania, a prosperous island nation.

Current Account   Financial Account
Exports of Goods $1,940   Capital Inflow $661  
Imports of Goods ???   Capital Outflow $347  
Trade Balance   ??? Financial Account   ???
Exports of Services $569   Capital Account   $0
Imports of Services ???   Statistical Discrepancy   $0
Services Balance   $16 Balance of Payments   ???
Income Received on Investments $704        
Income Paid on Investments $505        
Net Income on Investments   ???      
Net Transfers   $-168      
The balance on the Current Account   ???      

Given this information, what is the value for the imports of goods?

Sometimes this question generates some weird numbers. Remember that you would always add the values in a category to get the total. So the total for the Financial Account is always Capital Inflow + Capital Outflow and the Trade Balance is always Exports + Imports for this table. It's just that sometimes those values being added are negative. If you get a negative answer, you should enter in the negative.

In 2001, the United Kingdom's economy exported goods worth £192 billion and services worth another £77 billion. It imported goods worth £225 billion and services worth £66 billion. Receipts of income from abroad were £140 billion while income payments going abroad were £131 billion. Government transfers from the United Kingdom to the rest of the world were £23 billion, while various U.K government agencies received payments of £16 billion from the rest of the world.

  1. Calculate the U.K. merchandise trade deficit for 2001. 
  2. Calculate the current account balance for 2001. 
  3. Explain how you decided whether payments on foreign investment and government transfers counted on the positive or the negative side of the current account balance for the United Kingdom in 2001.

In 1995, the U.S. economy imported $750 billion in goods and exported $576 billion in goods. However, it exported $219 billion in services and imported $141 billion in services. Receipts of income from abroad were $211 billion while income payments going abroad were $191 billion. Unilateral transfers from the United States to other countries were $34 billion. Calculate the merchandise trade deficit for 1995. Calculate the current account balance for 1995. Also, explain how you decided whether payments on foreign investment and unilateral transfers counted on the positive or the negative side of the current account balance.