Consider each of the hypothetical U.S. Balance of Payments (primary) current account transactions shown in (a), (b), and (c) below, identify whether it is an Export, Import, Factor Payment (R), or Unilateral Transfer (U).And whether it represents a payment inflow or payment outflow.

Then, for each of the balancing financial account transactions, shown in (a)', (b)', and (c)' below, identify:

(i)If the transaction corresponds to the U.S. Assets Abroad account or to the Foreign Assets in the U.S. (U.S. Liabilities to Foreigners) account; and

(ii)If the transaction represents a payment inflow or payment outflow.Remember, in the U.S. assets abroad account, an acquisition of a foreign asset is an outflow; a sale of a foreign asset, an inflow.In the Foreign assets in U.S. (U.S. liabilities to foreigners) account, a purchase of a U.S. asset by a foreign entity is an inflow; a sale of a U.S. asset by a foreign entity, an outflow.(3 points; 0.6 points per segment)

Note:The first two are done for you.

(a)A German importer purchases a $2000 case of U.S. wine from a distributor. (-0)

Answer:Export; payment inflow

(a)'For payment, a U.S. bank makes a $2000 loan to the German wine importer. (-0)

Answer:U.S. Assets abroad. (Foreign liabilities to the U.S.);payment outflow

(b)A U.S. tourist spends $3000 on room and board in Germany.(Note:spending by U.S. nationals on tourism abroad is recorded as an import of a service; foreign tourism expenditures in U.S. are recorded as exports of a service.) (-

Answer:

(b') To make payment, the tourist's bank in the U.S. draws down its deposits at a bank in Germany by $3000. (-

Answer:

(c)A German university student studying in New York deposits at a local U.S. bank a $5000 U.S. bank check received from her parents living in Munich. (-

Answer:

(c') To make payment (on the $5000 check, of course), the German bank draws down $5000 from its account at a bank in the U.S.(-

Answer:

(d)Compute the current account balance. (-

Answer:

(e)Compute the financial account balance. (-

Answer:

Note:to compute answers to each of the above, it might help to fill in the Table below from those current accounts and financial account balancing transactions above, placing the letter of the transaction next to the appropriate entry.(You do not have to do this, however.)

Current Account

InflowsOutflows

Exports

Imports

Factor Payments(R)

Unilateral Transfers (U)

___________________________________________________________________________________________

Sum

Financial AccountInflowsOutflows

U.S.Assets Abroad

Foreign Assets in the U.S.

(U.S. liabilities to foreigners)

______________________________________________________________________________________________

Sum