The following are the hypothetical transactions that took place between the US and UK during 2006. 1. A US resident imports $500 worth of merchandise from a UK resident and agrees to pay in three months (IOU of $500). 2. After three months in the same year) the US resident pays for his imports by drawing down his bank balance in London by an amount equivalent to $500. The UK resident retires the IOU. 3. The Ford Foundation gives $100 to a UK University which the UK University deposits in a US bank. 4. The UK University use the $100 to buy books on economics produced in the US. 5. AUS resident buys a $1,000 UK stock and pays for it by lowering his bank balance in UK by an equivalent amount. 6. The same US resident receives a dividend of $100 from his investment in UK and deposits it in his bank in UK. 7. A UK resident buys $400 of US treasury bills and pays for it out of his bank account in a US bank. 8. The UK resident earns interest of $40 and deposits both the principal and interest ($440) in his UK account. Indicate how each of the above transactions are entered in the BOP following a double entry book-keeping Prepare a summary BOP for the US using the above information. CURRENT ACCOUNT Export of goods Import of goods Merchandise trade balance Export of services Import of services Balance on goods and services Income received from abroad Income payments abroad Balance on goods, services, and income Unilateral transfers received Unilateral transfers made Balance on current account CAPITAL ACCOUNT Net increase(+)/decrease in foreign assets in US The following are the hypothetical transactions that took place between the US and UK during 2006. 1. A US resident imports $500 worth of merchandise from a UK resident and agrees to pay in three months (IOU of $500). 2. After three months in the same year) the US resident pays for his imports by drawing down his bank balance in London by an amount equivalent to $500. The UK resident retires the IOU. 3. The Ford Foundation gives $100 to a UK University which the UK University deposits in a US bank. 4. The UK University use the $100 to buy books on economics produced in the US. 5. AUS resident buys a $1,000 UK stock and pays for it by lowering his bank balance in UK by an equivalent amount. 6. The same US resident receives a dividend of $100 from his investment in UK and deposits it in his bank in UK. 7. A UK resident buys $400 of US treasury bills and pays for it out of his bank account in a US bank. 8. The UK resident earns interest of $40 and deposits both the principal and interest ($440) in his UK account. Indicate how each of the above transactions are entered in the BOP following a double entry book-keeping Prepare a summary BOP for the US using the above information. CURRENT ACCOUNT Export of goods Import of goods Merchandise trade balance Export of services Import of services Balance on goods and services Income received from abroad Income payments abroad Balance on goods, services, and income Unilateral transfers received Unilateral transfers made Balance on current account CAPITAL ACCOUNT Net increase(+)/decrease in foreign assets in US
