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Unformatted text preview: ECON 460 -001 and 002: Homework 7 1. Use the transactions in Example 8 to fill the entries in the following BOP: (20 points) Now let us write the BOP statement for the above example: Now let us write the BOP statement for the above example: I. Goods Exports: $100 m +$10 m = +110 million Goods Imports: -150 million Balance in Goods or Merchandise Trade Balance: -40 million Services Exports: +10 million Services Imports: Balance in Goods and Services:-30 million Investment Income Received: Investment Income paid:-10 million Balance in Goods, services and Investment Income:-40 million Unilateral Transfers Received: Unilateral Transfers Paid:-10 million Current Account Balance:-50 million II. Net increase in foreign owned long term assets in the US: +50+200= +250 Net increase in US holdings of long term foreign assets: III. Net increase in foreign owned short term assets in the US: -10+10-200+150-50 = -100 million Net increase in US holdings of short term foreign assets: -110 million IV. Net Increase in foreign Central bank holding of US assets: +10 million Net Increase in Feds holdings of foreign assets: Financial Account Balance: +50 million 2. Explain how the following items would be entered into the U. S. balance of payments: (25 points) a. A disaster relief shipment of wheat to Bangladesh: Credit Entry- Exports of goods (Category I) Debit Entry - Unilateral Transfers (Category I) b. Imports of textile machinery Debit Entry - Imports of textile machinery (Category 1) Credit entry - Increase in foreign holdings of short-term domestic assets (Category III) OR Credit entry: Decrease in US holdings of short-term foreign assets (Category III) c. A $ 1,000,000 Japanese purchase of U. S. government bonds Credit Entry - Increase in foreign holdings of long-terms assets in the US...
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- Fall '08