Measuring Macroeconomic Activity II (Balance of Payments)

Question 1

BoP

Answer 1

Balance of Payments

CA + KA = FA

Question 2

The BoPs three sub-accounts

Answer 2

1. Current account ( CA )
2. Capital account ( KA )
3. Financial account ( FA )

Question 3

Measuring the Current account ( CA )

Answer 3

1. Exports and import of goods and services
2. Primary income received and paid
3. Secondary income received and paid

CA = TB + BPI + BSI

Question 4

Measuring the capital account ( KA )

Answer 4

1. Capital transfers received and granted
2. Acquisition and disposal of no produced nonfinancial assets

KA = met receipt of capital transfers
- net acquisition of nonproduced nonfinancial assets

Question 5

Measuring the financial account ( FA )

Answer 5

1. Foreign direct investment
2. Portfolio investment
3. Other investment
4. Reserves

FA = net acquisition of foreign financial assets
- net incurrence of foreign financial liabilities

Question 6

FA > 0 (CA + KA > 0)

Answer 6

Domestic economy is a net lender

Question 7

FA < 0 (CA + KA < 0)

Answer 7

Domestic economy is a net borrower

Question 8

Transaction leading to a payment from nonresident to resident

Answer 8

1. First recorded as a credit entry

2. That off sets a debit entry

Question 9

Transaction leading to a payment from resident to nonresident

Answer 9

1. First recorded as a debit entry

2. That off sets a credit entry