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6. a) The state of Gallus has traded internationally for many years. You are provided with the following table of data relating to international transactions
6. a) The state of Gallus has traded internationally for many years. You are provided with the following table of data relating to international transactions between Gallus and the rest of the world in 2019: $ billions Debit Credit Trade in goods 163.0 119.8 Trade in services 47.8 77.4 Income flows 65.7 64.8 Current transfers 16.2 7.0 Transfer of capital funds 0.4 1.8 Direct and portfolio investment 56.1 -21.2 Other investment flows -87.4 10.4 Acquisition/disposal of non-produced/ 0.5 0.7 non-financial assets To/from reserves 3 0 Based on the figures in the table (which can be assumed to be correct, including negative terms), calculate the following quantities for Gallus, stating whether each of the balances (1) () represents a surplus or a deficit: i) Balance of Trade ii) Current Account Balance iii) Capital Account Balance iv) Financial Account Balance v) Balance of Payments vi) Net errors and omissions. [6 marks] b) In the following year, the interest rate in Gallus increases relative to the rest of the world. Describe briefly the impact that this will have on the Balance of Payments and hence on the exchange rate between Gallus' domestic currency and other currencies. [5 marks] [Total: 11 marks]
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