1. Suppose the following transactions take place in the U.S. in a given year. For each transaction, state which BOP accounts record a credit and debit transaction and include a brief explanation why it is a credit or debit record.

a. Boeing, a U.S. aerospace company, sells $3 billion of its 747 airplanes to China, which pays with proceeds from a loan from a consortium of U.S. banks. [2 marks]

b. Mitsubishi UFJ Financial Group purchases $70 million of 30-year U.S. Treasury bonds for one of its Japanese clients. Mitsubishi draws down its dollar account with Bank of America to pay for the bonds. [2 marks]

c. Eli Lilly, a U.S. pharmaceutical company, sends a dividend check for $25,255 to a Canadian investor in Toronto. The Canadian investor deposits the check in a U.S. dollar-denominated bank account at the Bank of Montreal. [2 marks]

d. The U.S. Treasury authorizes the New York Federal Reserve Bank to intervene in the foreign exchange market. The New York Fed purchases $5 billion with Japanese yen and euros that it holds as international reserves. [2 marks]

e. The president of the United States sends troops into a Latin American country to establish a democratic government. The total operation costs U.S. taxpayers $8.5 billion. To show their support for the operation, the governments of Mexico and Brazil each donate $1 billion to the United States, which they raise by selling U.S. Treasury bonds that they were holding as international reserves. [2 marks]

f. Honda of America, the U.S. subsidiary of the Japanese automobile manufacturer, obtains $275 million from its parent company in Japan in the form of a loan to enable it to construct a new state-of-art manufacturing facility in Ohio. [2 marks]