3. Explain the numerical effect on both the U.S.

current account and the U.S. capital account from each of these examples.

a. In the United States, the Best Buy company purchases $1 million worth of TVs from the Samsung corporation, a Korean firm, using U.S. dollars. In addition, Samsung keeps the U.S. dollars.

b. Best Buy purchases $1 million worth of TVs from the Samsung corporation, using U.S.

dollars. Samsung then trades its dollars to a third party for won, the Korean currency.

c. Best Buy trades $1 million for Korean won and then uses the won to buy TVs from Samsung. L-9658