Quiz_6__Key_ - Quiz 6 Indicate for each of the following...

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Unformatted text preview: Quiz 6 Indicate for each of the following transactions if it is recorded as a credit or a debit in the U.S. balance of payments, and indicate the account (Current or Financial) in which it would be recorded. 1. U.S. imports cars from Japan. Imports are recorded as debits (‐) in the current account. 2. The U.S. buyer of the Japanese cars pays with a check. Every debit has an offsetting credit, so the payment for the cars is a credit (+). Since the payment is made with a financial instrument (i.e., this is not barter), the payment is recorded in the financial account. 3. An American earns interest on her holding of German bonds. Interest income earned or paid is recorded in the current account. Earnings of interest are credits (+). 4. The German bond issuer pays with a check. Again, every credit has an offsetting debit, so the payment in this case is a debit (‐) in the financial account. ...
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This note was uploaded on 11/11/2011 for the course EC 340 taught by Professor Ballie during the Spring '10 term at Michigan State University.

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