1. Explain how each of the following transactions generates a credit and a debit in the American balance of payments accounts and described (BRIEFLY) how each entry would be classified:
   1. An American buys a share of German stock, paying by writing a check on an account with a Swiss bank.
   2. The Korean government carries out an official foreign exchange intervention in which it uses dollars held in an American bank to buy Korean currency from its citizens
   3. A tourist from Detroit buys a meal at a restaurant in Lyons, France, paying with a travelers check
   4. A California winemaker contributes a case of cabernet sauvignon for a London based win tasting.
   5. A US owned factory in Britain uses local earnings to buy additional machinery
2. Why might a government be concerned about a large current account deficit? Why should policy makers not be concerned about a large current account deficit (name at least two reasons)? Why might a government be concerned about a net positive or negative balance of payments?

b