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1. The double-entry principle in the balance-of-payments How will the following transactions affect the U.S. balance-of-payments? For each transaction in the following table, indicate in which U.S. account it appears as a credit and in which account it appears as a debit. Account with Credit Account with Debit Capital Transaction Miguel, a U.S. resident, buys an HDTV set for $2,500 and sends it to Mexico as a gift to his parents. Arielle, a French tourist, stays at a hotel in San Francisco and pays $400 for it with her debit card issued by a French bank. Frank, a U.S. resident, receives 500,000 in dividend payments on shares that he holds in a Japanese company, which are deposited in his account in a Japanese bank Current Financial Get Now Continue Continue without saving The following table shows the value of credits and debits in four balance-of-payments accounts in the fictional economy of Gamros. Debits (Billions of dollars) Credits (Billions of dollars) Balance-of-Payments Account Merchandise Services Income Receipts Unilateral Transfers Total Based on the total values of Gamros's debits and credits, there is Gamros. This means that Gamros has a deficit in the money flowing out of Gamros to foreign countries than there is flowing into account Complete the following table based on the credits and debits presented in the previous table. Deficit or Surplus Size of Deficit or Surplus (Billions of dollars) How to Calculate Term Current Account Balance Balance of Trade W i e gut of Gamros to foreign countries than there is flowing into Gamros. This means that Gan Merch, and Service Debits - Merch, and Service Credits Merchandise Credits - Merchandise Debits Sum of Credits - Sum of Debits ES Complete the following table 4 Sum of Debits - Sum of Credits Merchandise Debits - Merchandise Credits Merch, and Service Credits - Merch, and Service Debits Term Deficit or Surplus Size of Deficit or Surplus (Billions of dollars) Current Account Balance Balance of Trade Let G stand for government spending, T for taxes, I for private investment, and S for private saving. Complete the following equation for the current account deficit: Current Account Deficit = ( - )+(_ - ) Which of the following statements about the current account deficit are correct? Check all that apply. Using a current account deficit to finance domestic consumption will never be a burden for a nation's economy. Using a current account deficit to increase domestic investment may be beneficial for a nation's economy. Economic expansions may result in large current account deficits. A nation should avoid a current account deficit and associated debt at all costs. A current account deficit can push current spending beyond current production. Which of the following could explain why a current account deficit may stimulate an economy? Increased imports displace workers in import-competing industries Foreign purchases of U.S. assets can stimulate the U.S. economy. Foreign purchases of U.S. Securities increase long-term interest rates