A. The Balance on Goods and Services has been in deficit for years. Assume the U.S. has $400 of goods and services exports. Use a simple flow of trade diagram to illustrate a U.S. Balance on Goods and Services deficit of $50. Foreign. U.S.
II. Trade Accounts.
A. The Balance on Goods and Services has been in deficit for years. Assume the U.S. has $400 of goods and services exports. Use a simple flow of trade diagram to illustrate a U.S. Balance on Goods and Services deficit of $50.
Foreign.
U.S.
B. I have argued that the illustration above is incomplete because it requires foreigners to hold American dollars for years and years. This seems unlikely. Use another flow of trade diagram to show how a deficit in the Balance of Goods and Services can be offset somewhere else in the trade accounts.
U.S.
Foreign.
C. A Canadian furniture maker with plants in Canada and the United States, sells $100,000 worth of furniture made in Canada to Americans. They use the money from the sale to purchase $100,000 worth of furniture quality lumber from American suppliers to be used in their Canadian plant. How do these two transactions affect the Balance on Goods and Services? Give a number
D. A Canadian furniture maker with plants in Canada and the United States, sells $100,000 worth of furniture made in Canada to Americans. They use the money from the sale to purchase $100,000 worth of furniture quality lumber from American suppliers to be used in their American plant. How do these two transactions affect the Balance on Goods and Services? Give a number.
E. Assume the U.S. has a Current Account balance of zero with the rest of the world. That is, based on the Current Account, trade flows into and out of the U.S. are perfectly balanced. Now, assume the U.S. economy falls into a recession but the rest of the world economies stay strong. What would happen to the U.S. Current
Account Balance? (Go into: Deficit/Surplus/or Stay Balanced)
Step by step
Solved in 2 steps with 1 images
