1). Explain how each of the following transactions will be classified and recorded in the debit and credit of the U.S. balance of payments:

(a) A Japanese insurance company purchases U.S. Treasury bonds and pays out of its bank account kept in New York City.

(b) A U.S. citizen consumes a meal at a restaurant in Paris and pays with her American Express card.

(c) An Indian immigrant living in Los Angeles sends a check drawn on his L.A. bank account as a gift to his parents living in Bombay.

(d) A U.S. computer programmer is hired by a British company for consulting and gets paid from the U.S. bank account maintained by the British company.

2). Explain why agency problems are more severe in the case of MNCs in comparison with national companies.

3). What are the major risks of MNCs?

4). You are a UAE citizen (the currency of your country is the dirham) and you are engaged in large transactions with Greece (the currency of Greece is the euro), but you do not invest in the Greek stock and real estate markets. Last November (2021) you planned visit Greece on August 2022. In fact, you buy from Greece tourism services, and olive oil and feta cheese from the supermarket in your neighborhood. Suddenly, the economic situation in UAE changed in June 2022 and the Central Bank of the UAE announces an increase in the inflation rate and an increase in the short-term interest rate as a response of the Central Bank of the UAE. However, the Ministry of Finance of the UAE increased your salary to keep constant your standards of living and the purchasing power of your income. Do you cancel your trip to Greece and stop buying Greek delicacies?

(Hint: First, identify the impact of the 3 facts on the demand of euro. Then consider what kind of transactions are you involved with Greece: are you engaged more in trade transactions or more in capital flows? ).