3 chapter 13 from the us perspective the following

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Chapter 13 From the U.S. perspective, the following are debit (-) entries because they lead to making a payment to foreign residents. Debit – Examples include: o Merchandise imports o Transportation and travel services received by U.S. residents from other nations. o Income paid by U.S. residents on the investments of residents of foreign nations. o Aid given by the U.S. government One exception to the “exchange of equal values” principle might immediately occur to you: gifts exchange between domestic and foreign residents. But even in this case, to maintain the double-entry principle, the other side of the transaction is entered as unilateral transfers. Notice that because every transaction in the BOP accounts generates a debit as well as a credit entry and these entries offset each other, the sum of all transactions recorded in the BOP accounts must equal to zero. II. BALANCE OF PAYMENTS STRUCTURE Although the BOP is in balance by definition (i.e., total debits = total credits), different parts of it may not be in balance. The following table shows different accounts within the U.S. balance of payments for 2008. There are basically two major accounts within the BOP of a nation. (1) The current account balance 4
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Chapter 13 (2) The capital and financial account balance Each of these two accounts is comprised of several sub-accounts. In the following, we talk about different accounts within the BOP structure. A. Current Account (CA) Balance The current account balance records exports and imports of goods and services, income flows, and unilateral transfers. There are several major sub-accounts in the current account balance. (1) Merchandize Trade Balance This account records the balance in exports and imports of goods (finished goods, intermediate goods, and raw materials). Table 1: The U.S. Balance of Payments – 2008 Current Account Capital and Financial Account Merchandise trade balance -$820.8 Capital account transactions, net -$2.7 Exports 1,291.4 Financial account transactions, net 546.6 Imports -2,112.2 Balance on capital and financial account 543.9 Services balance 139.7 Travel and transportation, net 160.9 Statistical discrepancy 129.3 Military transactions, net -21.4 Royalties and license fees, net 61.7 Other services, net -61.5 Goods and services balance -681.1 Income balance 127.6 Investment income, net 134.8 Compensation of employees, net -7.2 Unilateral transfers balance -119.7 U.S. Government grants -34.6 U.S. Government pensions -7.9 Private remittances -77.2 Current account balance -673.2 5
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Chapter 13 It is commonly referred to as the trade balance by the news media. The trade balance is more readily available than other balances because its calculation is relatively easy and information can be rapidly gathered and reported. Exports improve the current account and imports deteriorate it. Let EX stand for exports of goods and IM denote imports of goods If EX > IM trade balance surplus If EX < IM trade balance deficit If EX = IM equilibrium in trade balance 2011: Net exports of goods = - $738.292 billion Source : . Look for “balance of payments”, then click U.S.
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