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2. Show how each of the following would affect the following US balance of payments: trade balance (TB), net factor income abroad (NFIA), net unilateral transfers (NUT), financial account (FA), and capital account (KA). Identify which specific account is affected in each case (e.g., +$10 in TB). Note that the sum of the balance of payment accounts is zero. Example: A California computer manufacturer purchases a $50 hard disk from a Malaysian company, paying the funds from a bank account in Malaysia. Answer: The US imports a hard disk from Malaysia: TB = $50 The US draws a foreign asset to pay for the import (less external asset): FA = +$50. (Note: The balance of payment identity holds: CA + FA (+KA) = −- $50 + $50 = 0. No KA in this example.) a. A US tourist in Japan sells his iPod to a local resident for yen worth $100. (hint: A US tourist obtains Japanese currency.) b. A US owner of Honda shares receives $10,000 in dividend payments, which are paid into a Tokyo bank. c. The central bank of China purchases $1 million of export earnings from a firm that has sold $1 million of toys to the United States, and the central bank holds these dollars as reserves.

2. Show how each of the following would affect the following US balance of payments: trade balance (TB), net factor income abroad (NFIA), net unilateral transfers (NUT), financial account (FA), and capital account (KA). Identify which specific account is affected in each case (e.g., +$10 in TB). Note that the sum of the balance of payment accounts is zero. Example: A California computer manufacturer purchases a $50 hard disk from a Malaysian company, paying the funds from a bank account in Malaysia. Answer: The US imports a hard disk from Malaysia: TB = $50 The US draws a foreign asset to pay for the import (less external asset): FA = +$50. (Note: The balance of payment identity holds: CA + FA (+KA) = −- $50 + $50 = 0. No KA in this example.) a. A US tourist in Japan sells his iPod to a local resident for yen worth $100. (hint: A US tourist obtains Japanese currency.) b. A US owner of Honda shares receives $10,000 in dividend payments, which are paid into a Tokyo bank. c. The central bank of China purchases $1 million of export earnings from a firm that has sold $1 million of toys to the United States, and the central bank holds these dollars as reserves.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter6: Managing In The Global Economy
Section: Chapter Questions
Problem 6E
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2. Show how each of the following would affect the following US balance of payments: trade balance (TB), net factor income abroad (NFIA), net unilateral transfers (NUT), financial account (FA), and capital account (KA). Identify which specific account is affected in each case (e.g., +$10 in TB). Note that the sum of the balance of payment accounts is zero. Example: A California computer manufacturer purchases a $50 hard disk from a Malaysian company, paying the funds from a bank account in Malaysia. Answer: The US imports a hard disk from Malaysia: TB = $50 The US draws a foreign asset to pay for the import (less external asset): FA = +$50. (Note: The balance of payment identity holds: CA + FA (+KA) = −- $50 + $50 = 0. No KA in this example.) a. A US tourist in Japan sells his iPod to a local resident for yen worth $100. (hint: A US tourist obtains Japanese currency.) b. A US owner of Honda shares receives $10,000 in dividend payments, which are paid into a Tokyo bank. c. The central bank of China purchases $1 million of export earnings from a firm that has sold $1 million of toys to the United States, and the central bank holds these dollars as reserves.
Transcribed Image Text:2. Show how each of the following would affect the following US balance of payments: trade balance (TB), net factor income abroad (NFIA), net unilateral transfers (NUT), financial account (FA), and capital account (KA). Identify which specific account is affected in each case (e.g., +$10 in TB). Note that the sum of the balance of payment accounts is zero. Example: A California computer manufacturer purchases a $50 hard disk from a Malaysian company, paying the funds from a bank account in Malaysia. Answer: The US imports a hard disk from Malaysia: TB = $50 The US draws a foreign asset to pay for the import (less external asset): FA = +$50. (Note: The balance of payment identity holds: CA + FA (+KA) = −- $50 + $50 = 0. No KA in this example.) a. A US tourist in Japan sells his iPod to a local resident for yen worth $100. (hint: A US tourist obtains Japanese currency.) b. A US owner of Honda shares receives $10,000 in dividend payments, which are paid into a Tokyo bank. c. The central bank of China purchases $1 million of export earnings from a firm that has sold $1 million of toys to the United States, and the central bank holds these dollars as reserves.
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