Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 29, Problem 1P
To determine
(a)
To indicate:
Whether the given transaction is a credit or a debit for the U.S. current account.
Expert Solution
Answer to Problem 1P
This transaction will be recorded on the debit side of the US current accounts.
Explanation of Solution
Import of a B Car from Germany means outflow of US dollar from the USA to Germany. When money goes out, it is recorded on the debit side. Therefore, this transaction should be recorded on the debit side of the US current account.
Economics Concept Introduction
Credit side of financial account:
The right side of the financial account. The value which comes in is recorded on the credit side.
Debit side of financial account:
The left side of the financial account. The value which goes out is recorded on the debit side.
To determine
(b)
To indicate:
Whether the given transaction is a credit or a debit for the U.S. current account.
Expert Solution
Answer to Problem 1P
This transaction will be recorded on the credit side of the US current accounts.
Explanation of Solution
Purchase of software from an American company by a Japanese firm means an inflow of US dollar from Japan to the USA. Whenever money comes in, it is recorded on the credit side. Therefore, it should be recorded on the credit side of the US current account.
Economics Concept Introduction
Credit side of financial account:
The right side of the financial account. The value which comes in is recorded on the credit side.
Debit side of financial account:
The left side of the financial account. The value which goes out is recorded on the debit side.
To determine
(c)
To indicate:
Whether the given transaction is a credit or a debit for the U.S. current account.
Expert Solution
Answer to Problem 1P
This action will be recorded on the debit side of the US current account.
Explanation of Solution
Financial aid implies outflow of US dollars to Israel. However, there is no reciprocation in this case but whenever money goes out is debited. Therefore, this should be recorded on the debit side of the US current account.
Economics Concept Introduction
Credit side of financial account:
The right side of the financial account. The value which comes in is recorded on the credit side.
Debit side of financial account:
The left side of the financial account. The value which goes out is recorded on the debit side.
To determine
(d)
To indicate:
Whether the given transaction is a credit or a debit for the U.S. current account.
Expert Solution
Answer to Problem 1P
This transaction will be recorded on the credit side of the US current account.
Explanation of Solution
Sales of oranges by US-based firm to Great Britain means an inflow of US dollar from Great Britain to the USA. Whenever money comes in, that is credited. Therefore, it should be recorded on the credit side of the US current account.
Economics Concept Introduction
Credit side of financial account:
The right side of the financial account. The value which comes in is recorded on the credit side.
Debit side of financial account:
The left side of the financial account. The value which goes out is recorded on the debit side.
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