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Question 1

A US resident visits London and spends $200 on hotels, meals and so on. Describe what accounts the US will CR/DR, and whether this is an in/outflow.

Answer 1

DR Travel Services in Current Acct; CR Capital Acct (Increase in Foreign Holdings of US Assets or Claims on the US-Inflow)

Question 2

The US gov’t gives a US bank balance of $100 to the gov’t of a developing nation as aid. Describe what accounts the US will CR/DR, and whether this is an in/outflow.

Answer 2

DR Unilateral Transfers (Pmt to Foreigners); CR Financial Inflow (Increase in Foreign Claims on, or Foreign Assets in, the US)

Question 3

A US resident purchases a foreign stock for $400 and pays for it by increasing foreign bank balances in the US. Describe what accounts the US will CR/DR, and whether this is an in/outflow.

Answer 3

DR Financial Outflow (The Purchase of Foreign Stock by the US Resident); CR Financial Inflow (The Increase in Foreign Bank Balances in the US)

Question 4

Foreign investor purchases $300 of US T-Notes and pays by drawing down his bank balances in the US. Describe what accounts the US will CR/DR, and whether this is an in/outflow.

Answer 4

DR Financial Outflow (Reduction in Foreign Assets in the US); CR Financial Inflow (Increase in Foreign Assets in the US)

Question 5

Are royalties received by foreigners a service export or import?

Answer 5

Export

Question 6

Are income payments on foreign assets in the US service imports or exports?

Answer 6

Imports

Question 7

Say $518B in interest and dividends was paid on foreign investments in the US. Is this a service import or export?

Answer 7

Import

Question 8

Is the inflow of foreign capital into the US recorded as a credit or debit?

Answer 8

Credit

Question 9

Are payments made to foreigners for the services of the foreign capital invested in the US recorded as a debit or credit?

Answer 9

Debit

Question 10

Which of the following is a debit in the current account? (a) merchandise export (b) service export (c) gift to foreigners (d) gift from foreigners?

Answer 10

(c) gift to foreigners

Question 11

A UK citizen living in the US incurs an exorbitant phone bill from Verizon. A few weeks later the Englishman leaves the US permanently. Verizon forgives the Englishman’s debt, is this a capital outflow or inflow? A debit or credit to the capital account?

Answer 11

Capital Outflow; Debit

Question 12

A US citizen renounces his citizenship, becomes an Australian citizen and moves to Sydney taking with him $5,000 in US stock certificates. Is this a capital inflow or outflow? Debit or credit to the capital account?

Answer 12

Outflow; Debit

Question 13

A UK citizen purchases a US stock. Is this a (a) credit in the US current account (b) debit in the US capital account (c) credit in the US official reserve account (d) credit in the US capital account

Answer 13

(d) credit in the US capital account

Question 14

A Canadian citizen receives receives a $500 dividend on a US stock. This represents (a) a debit in the US capital account (b) a credit in the US capital account (c)(d)

Answer 14

will finish

Question 15

A US firm exports $500 of goods to the UK. The UK firm pays the US firm by transferring $500 worth of £ into its London account. Describe what accounts the US will CR/DR.

Answer 15

CR Mdse Category in Current Account; DR Capital Account (Increase in US Bank Assets Abroad-Outflow)

Question 16

The US Gov’t gives India $200 cash aid. Describe what accounts the US will CR/DR, and whether this is an in/outflow.

Answer 16

DR Unilateral Txfrs; CR Official Reserves (increase in foreign official assets in the US)

Question 17

An UK citizen buys $400 of US stocks and pays for them by drawing on his dollar deposits in a NY bank. Describe what accounts the US will CR/DR, and whether this is an in/outflow.

Answer 17

CR Capital Acct (Increase in Foreign Assets in the US/Inflow); DR Capital Acct (Decline in Foreign Bank Assets in US/Outflow)