CH12 BOP - ECO369 International Economic Issues Lecture...

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ECO369 International Economic Issues Lecture Outline GVSU, Wei Sun Chapter 12. Balance of Payments Objectives To read a country’s balance of payments To be able to classify international transactions To distinguish between the current account, the capital (financial) account, and the official reserves account and the links among these accounts To calculate a nation’s balance of payments accounts from data on its international transactions To evaluate some issues related to the U.S. current account deficits I. Overview A. The Balance of Payments B. Accounts in the BOP Statement for the U.S. Investment income – Capital flows – Service - Accounts Credit Debit A. Current Account 1. Merchandise 2. Service 3. Investment Income 4. Unilateral Transfer B. Capital account 1
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5. foreign assets (in foreign country), private holdings 6. domestic assets (at home country), private holdings C. Official Settlement Balance 7. foreign assets (in the foreign country), public holdings 8. domestic assets ( at home country), public holdings 9 statistical discrepancy C. An International Transaction Example: An American sells 1000 typewriters to an Italian, who pays for the goods out of his bank account in Citibank in New York. Rule of Thumb in Recording a Transaction D. Examples of Double-entry Book-keeping Classify the following transactions into the US Balance of Payments. And calculate the balances on the current and capital accounts. 1. A U.S. citizen sells a $1000 typewriter to an Italian, and the Italian pays for it out of his account at Citibank in New York. 2
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2. A U.S. citizen pays $200 for dinner at a French restaurant in France by charging his Visa credit card. 3. A U.S. citizen buys a $95 worth of new stock issued by the United Kingdom oil giant British Petroleum (BP) paid with a check drawn on his stockbroker money market account. BP deposits the $95 in its own U.S. bank account at Second Bank of Chicago. 4. A U.S. bank forgives $5000 in debt owed to it by the government of Bygonia.
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CH12 BOP - ECO369 International Economic Issues Lecture...

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