Question: The following transactions expressed in US billions take place during

The following transactions (expressed in US$ billions) take place during a year. Calculate the U.S. merchandise-trade, current-account, financial-account, and official reserves balances.
a. The United States exports $300 of goods and receives payment in the form of foreign demand deposits abroad.
b. The United States imports $225 of goods and pays for them by drawing down its foreign demand deposits.
c. The United States pays $15 to foreigners in dividends drawn on U.S. demand deposits here.
d. American tourists spend $30 overseas using traveler’s checks drawn on U.S. banks here.
e. Americans buy foreign stocks with $60, using foreign demand deposits held abroad.
f. The U.S. government sells $45 in gold for foreign demand deposits abroad.
g. In a currency support operation, the U.S. government uses its foreign demand deposits to purchase $8 from private foreigners in the United States.

Sale on SolutionInn
  • CreatedJune 27, 2014
  • Files Included
Post your question