Consider the economy of country Smiley in 2014. Its exports of merchandise and imports of merchandise are

$500,000 and $300,000, respectively. Its exports of services and imports of services are $150,000 and $200,000, respectively.

Smiley’s factories located in foreign countries earn

$100,000. Smiley’s interest payment to foreign countries is

$200,000. Due to the earthquake, Smiley receives foreign aid of $200,000.

a. What does balance of payments mean?

b. What is the value of the current account balance?

c. What is the value of the finance account balance?