Answered step by step
Verified Expert Solution
Question
1 Approved Answer
4. (10 pts) Consider two fictional economies, one called the domestic country and the other the foreign country. Given the transactions listed in (1) through
4. (10 pts) Consider two fictional economies, one called the domestic country and the other the foreign country. Given the transactions listed in (1) through (7), construct the balance of payments for the domestic country . If necessary, include a statistical discrepancy . Report the values corresponding to (i)-(v) in the balance of payments. (1) The domestic country purchased $100 in oil from the foreign country. (2) Foreign tourists spent $25 on domestic ski slopes. (3) Foreign investors were paid $15 in dividends from their holdings of domestic equities. (4) Domestic residents gave $25 to foreign charities. (5) Domestic businesses borrowed $65 from foreign banks. (6) Foreign investors purchased $15 of domestic government bonds. (7) Domestic investors sold $50 of their holdings of foreign government bonds. Current Account Amount ($) Exports (i) 25 Imports 100 Trade balance (1i) -75 Income received 0 Income paid 15 Net income -15 Current account balance (iii) -90 Financial Account Net capital transfers -25 Increase in foreign holdings of domestic assets (iv) 65+15 Increase in domestic holdings of foreign assets -50 Financial account balance (v) 105 Statistical discrepancy: financial account + current account 15
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started