each country You must also decide if the transaction belongs in the Current Account or a Capital Account When all of your transactions are completed make sure the sum of the Current Account and Capital ID: 935749
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Slide1
Slide2Directions
: For each of the transactions below, record both the “Debit” and “Credit” for
each country
. You must also decide if the transaction belongs in the “Current Account” or
a “
Capital
Account.”
When all of your
transactions are
completed, make sure the sum of the Current Account and Capital
Account equals
zero.
Alpha
buys a graphing calculator from Omega for $50.
Omega
downloads a movie from Alpha for $5.
Alpha
immigrants send $100 back to Omega relatives
Alpha
corporations pay $20 dividends to Omega stockholders.
The
Alpha government sells $75 in bonds to Omega.
Omega
investors buy Alpha junk bonds for $15.
Alpha
investors receive interest payments from Omega Government of $10
Alpha
businesses borrow $65 from Omega Banks.
Slide3Directions
: For each of the transactions below, record both the “Debit” and “Credit” for
each country
. You must also decide if the transaction belongs in the “Current Account” or
a “
Capital
Account.”
When all of your
transactions are
completed, make sure the sum of the Current Account and Capital
Account equals
zero
.
Omega buys $80 of agricultural products from Alpha.
Alpha
charities donate $20 to flood victims in Omega.
Alpha
receives $10 in interest payments for ownership of Omega
junk bonds
.
Alpha
residents buy $90 in Omega stock.
Higher
interest rates in Alpha attract an inflow of $20 from Omega.
Slide4In
2000
,
imports for the USA exceeded exports by $375.7 billion, investment outflows exceeded inflows by $14.9 billion, and there were net transfers to the world of $54.1 billion. What was the Current Account balance? In 2001, exports for the USA were $720.8 billion and imports were $1,147.4 billion. How much was net exports?In 1980, the USA had net exports of -$19.4 billion, net investment income of $30.1 billion and transfer payments of -$8.2 billion. Did the USA have a Current Account surplus or deficit?If a country is running a Current Account deficit, the Financial Account must be a ________. (deficit/surplus).If Alpha buys stock in a corporation in Omega, which account, Current or Financial, would the transaction be recorded?
Assessment Questions
Slide5When Alpha imports cheese from Omega, how is the transaction recorded for Alpha. Is it a debit or a credit?
If Omega has a Current Account surplus of $100, Omega's
Financial Account
must equal ______?How is the trade balance calculated ________________________________________________TRUE or FALSE. Alpha has an underground market in illegal drugs. Because these activities are not reported on the balance of payments, the Current and Financial Account would not balance.Assessment Questions (cont.)