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Magazine Chapter 19: Q.3 (page 527)
For each of the following, identify in which part of the balance-of-payments account the transaction is recorded (current account, capital account, or net change in international reserves) and whether it is a receipt or a payment.
a. A British subject鈥檚 purchase of a share of Johnson & Johnson stock
b. An American citizen鈥檚 purchase of an airline ticket from Air France
c. The Swiss government鈥檚 purchase of U.S. Treasury bills
d. A Japanese citizen鈥檚 purchase of California oranges
e. $50 million of foreign aid to Honduras
f. A loan from an American bank to Mexico
g. An American bank鈥檚 borrowing of euro dollars
Short Answer
a. A US citizen buys airline tickets from Air France.
b. A Japanese citizen鈥檚 purchase of California oranges
c. $50 million of foreign aid to Honduras
d. A loan from an American bank to Mexico
e. An American bank鈥檚 borrowing of euro dollars
Step by step solution
Concept Introduction
Accounting balance refers to the account that shows the sum of the online trading activity during a country. it's calculated by calculating the entire exports and total imports of a rustic within which all the exports are to be credited while all the imports are to be debited. The credit balance shows a surplus of the account while a debit balance show a deficit of the account.
Explanation of Solution
The increase or decrease in the current balance due to the given situation is:
Thus, all the exports increase this account balance and every one the imports decrease this account balance of a rustic.
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