Ch02 PP 06

Ch02 PP 06 - Chapter 2 International Flow of Funds Chapter...

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International Flow of Funds 2 Chapter
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2 - 2 Chapter 2 International Flow of Funds Balance of Payments The balance of payments is a summary of transactions between domestic and foreign residents for a specific country over a specified period of time. Inflows of funds generate credits for the country’s balance, while outflows of funds generate debits.
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2 - 3 Current Account The current account summarizes the flow of funds between one specified country and all other countries due to purchases of goods or services, or the provision of income on financial assets. Key components of the current account include the balance of trade , factor income , and transfer payments .
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2 - 4 The U.S. Current Account in 2003 (1) U.S. exports of goods + $712 + (2) U.S. exports of services + 292 + (3) U.S. income receipts + 275 = $1,279 (in billions of $) (5) U.S. imports of goods $1,263 + (6) U.S. imports of services 246 + (7) U.S. income payments 259 = $1,768 (9) Net transfers by the U.S. $68 (10) Current account balance = (4) – (8) – (9) $557
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2 - 5 The capital account summarizes the flow of funds resulting from the sale of assets between one specified country and all other countries. The key components of the capital account are direct foreign investment, portfolio investment, and other capital investment. Capital Account
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Some countries are more dependent on trade than others. ¤ The trade volume of a European country is typically between 30 – 40% of its GDP, while the trade volume of U.S. (and Japan) is typically between 10 – 20% of its GDP. Nevertheless, the volume of trade has
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Ch02 PP 06 - Chapter 2 International Flow of Funds Chapter...

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