Question
In 2010 the country of Ikonomia has a current account deficit of $1 billion and a nonreserve financial account surplus of $750 million. Ikonomia's capital
In 2010 the country of Ikonomia has a current account deficit of $1 billion and a nonreserve financial account surplus of $750 million. Ikonomia's capital account is in a $100 million surplus. In addition, Ikonomian factors located in foreign countries earn $700 million. Ikonomia has a trade deficit of $800 million. Assume Ikonomia neither gives nor receives unilateral transfers. Ikonomia's GDP is $9 billion.
a.What happened to Ikonomia's net foreign assets during 2010? Did it acquire or lose foreign assets during the year?
b.Compute the official settlements balance (OSB). Based on this number, what happened to the central bank's (foreign) reserves?
c.How much income did foreign factors of production earn in Ikonomia
during 2010?
d.Compute net factor income from abroad (NFIA).
e.Using the identityBOP = CA + FA + KA,show thatBOP= 0.
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