The below are transactions between two countries.

a.A U.S. resident purchases a euro-denominated bond from a German company

b.Singaporean parents pay for their daughter to study at a U.S. university

c.A British company imports Spanish oranges, paying with Eurodollars on deposit in London

d.A London insurance firm pays for losses incurred in the United States because of an international terrorist attack

e.Cathay Pacific Airlines buys jet fuel at Los Angeles International Airport so it can fly the return segment of a flight segment back to Hong Kong

You are required to classify the above transactions as below example with answer.

Example

Transaction:A U.S. food chain imports wine from Chile

Answer:Debit to U.S. goods part of the current account, credit to Chilean goods part of the current account.

(10 marks)

Part II

a.Explain Product life-cycle theory of Direct Foreign Investment.(6 marks)

b.Some critics claimed that the Product lift-cycle theory has limitation in use today. Explain.

(4 marks)