3. Interpreting a simplified balance sheet As Aa Consider this table, which shows hypothetical balance-of-payments data for the United States. Choose the correct value for each of the boxes. Simplifled Balance of Payments (Billions of Dollars) Account Net Balance Merchandise Services -4 Income -4 Unilateral transfers -2 Current account +4 Financial account Statistical discrepancy -1 Trade balance 0 Suppose an American business owner purchases chocolates from Belgium in order to sell them in her shops. This would be entered as a item under the section of the U.S. current account. The net value of the merchandise and services accounts combined gives the value of within the national income accounting equation GDP C+I+ G + X. If you rewrite the equation as X GDP - (C +I+G), you can see that the current U.S. value of X implies that than it is consuming, making it a This means that the United States is producing Any surplus or deficit in one account must be offset by deficits or surpluses in other balance-of-payments accounts. Because the current account is in , the excess of foreign currency held by Americans must either be loaned to foreigners, or used to buy foreign stocks or bonds. All of these transactions are then recorded in the account. Since any imbalance in one actount automatically leads to an equal, but opposite, imbalance in the other, the balance of payments is always TY