25-bot - Balance of Trade Lecture 25-PREVIEW Dr. Jennifer...

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macroS2010 Lec25-page 1 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Balance of Trade Lecture 25-PREVIEW Dr. Jennifer P. Wissink ©2009 Jennifer P. Wissink, all rights reserved. April 26, 2010
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macroS2010 Lec25-page 2 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ macroS2010 Lec24-page 2 Keeping Track of Trade: Foreign Foreign exchange is simply all currencies other than the domestic currency of a given country. The balance of payments: the record of a country’s transactions in goods, services, and assets with the rest of the world. a record of the country’s sources (supply) and uses (demand) of foreign exchange. note: not a “balance sheet” but: the overall account always balances Broken into two pieces: current and capital accounts
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macroS2010 Lec25-page 3 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ - 2.2 (11) Net capital account transactions 0 (13) Balance of payments (5 + 10 + 11 + 12) 83.6 (12) Statistical discrepancy 657.4 (10) Balance on capital account (6 + 7 + 8 + 9) 412.7 (9) Change in foreign government assets in the United States - 23.0 (8) Change in U.S. government assets abroad (increase is –) 1,451.0 (7) Change in foreign private assets in the United States - 1,183.3 (6) Change in private U.S. assets abroad (increase is –) Capital Account - 738.6 (5) Balance on current account (1 + 2 + 3 + 4) - 104.4 (4) Net transfer payments 74.3 (3) Net investment income - 707.9 Income payments on investments 782.2 Income received on investments 106.9 (2) Net export of services - 372.3 Import of services 479.2 Export of services - 815.4 (1) Net export of goods - 1,964.6 Goods imports 1,149.2 Goods exports Current Account Billions of dollars TABLE 20.1 United States Balance of Payments, 2007
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macroS2010 Lec25-page 4 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ macroS2010 Lec24-page 4 The Current Account Debit items: any transaction that causes the US to loose foreign exchange. Imports use up foreign exchange and are a debit (–) item. Credit items: any transaction that provides the US with foreign exchange. Exports generate foreign exchange and are a credit (+) item on the current account . Current account: the sum of net exports of goods and services (exports minus imports), net income received from investments abroad, and net transfer payments from abroad.
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http://www.arts.cornell.edu/econ/wissink/econ102jpw/ The Current Account The balance of trade: a country’s exports of goods and services minus its imports of goods and services. A trade deficit occurs when a country’s exports are less than its imports. A negative b.o.t.
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25-bot - Balance of Trade Lecture 25-PREVIEW Dr. Jennifer...

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