Balance of Payments (BoP): Completed Transactions

For each of the following transactions, indicate how the transaction would appear in the US

balance of payments. Indicate the USD amount (with the correct sign) as well as the

appropriate accounts and sub-accounts (use the structure below):

CA: Current Account

• Trade: Export - Imports
• Income
• Transfers

KA: Capital (Financial) Account

• FDI
• Portfolio
• Other

OSA: Official Settlement Account

Each transaction triggers two offsetting entries in the BoP.

Example: Starbucks buys coffee from an Indonesian farmer for USD 50 K who in return acquires fertilizer from a US manufacturer.

US Current Account (CA):

Trade: -50 K (import of coffee)

Trade: +50 K (export of fertilizer)

a. Alaska Airlines purchases its first Airbus A 320 from Airbus Industries in Europe for USD 99 M. Airbus Industries uses the receipt of USD 99 M to reduce its outstanding USD loan with Citibank in New York.

b. A Washington State farmer sells apples to a Mexican supermarket chain. The farmer is paid MXN 180 M, which the farmer keeps in her MXN bank account. The spot exchange rate is 18 MXN/USD. Express answer in USD at the current exchange rate.

c. A U.S. oil company imports oil from a firm in Saudi Arabia. The firm pays USD 220 M for the oil which is kept in a US bank by the Saudi firm.

d. Apple pays USD 970 M dividends to its non-US shareholders who reinvest the dividends in Apple shares.

e. A U.S. company acquires a 40% stake in a joint venture (JV) in China for USD 80 M. The payment is converted from USD to RMB by the People's Bank of China (PBC), i.e. the Chinese central bank, at the official exchange rate. PBC then provides the USD to a state-owned Chinese enterprise that acquires a US firm.