Directions: For each of the transactions below, record both the “Debit” and “Credit” for each country. You must also decide if the transaction belongs.

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Presentation transcript:

Directions: For each of the transactions below, record both the “Debit” and “Credit” for each country. You must also decide if the transaction belongs in the “Current Account” or a “Capital Account.” When all of your transactions are completed, make sure the sum of the Current Account and Capital Account equals zero. 1.Alpha buys a graphing calculator from Omega for $50. 2.Omega downloads a movie from Alpha for $5. 3.Alpha immigrants send $100 back to Omega relatives 4.Alpha corporations pay $20 dividends to Omega stockholders. 5.The Alpha government sells $75 in bonds to Omega. 6.Omega investors buy Alpha junk bonds for $15. 7.Alpha investors receive interest payments from Omega Government of $10 8.Alpha businesses borrow $65 from Omega Banks.

Directions: For each of the transactions below, record both the “Debit” and “Credit” for each country. You must also decide if the transaction belongs in the “Current Account” or a “Capital Account.” When all of your transactions are completed, make sure the sum of the Current Account and Capital Account equals zero. 1.Omega buys $80 of agricultural products from Alpha. 2.Alpha charities donate $20 to flood victims in Omega. 3.Alpha receives $10 in interest payments for ownership of Omega junk bonds. 4.Alpha residents buy $90 in Omega stock. 5.Higher interest rates in Alpha attract an inflow of $20 from Omega.

1.In 2000, imports for the USA exceeded exports by $375.7 billion, investment outflows exceeded inflows by $14.9 billion, and there were net transfers to the world of $54.1 billion. What was the Current Account balance? 2.In 2001, exports for the USA were $720.8 billion and imports were $1,147.4 billion. How much was net exports? 3.In 1980, the USA had net exports of -$19.4 billion, net investment income of $30.1 billion and transfer payments of -$8.2 billion. Did the USA have a Current Account surplus or deficit? 4.If a country is running a Current Account deficit, the Financial Account must be a ________. (deficit/surplus). 5.If Alpha buys stock in a corporation in Omega, which account, Current or Financial, would the transaction be recorded? Assessment Questions

6.When Alpha imports cheese from Omega, how is the transaction recorded for Alpha. Is it a debit or a credit? 7.If Omega has a Current Account surplus of $100, Omega's Financial Account must equal ______? 8.How is the trade balance calculated ________________________________________________ 9.TRUE or FALSE. Alpha has an underground market in illegal drugs. Because these activities are not reported on the balance of payments, the Current and Financial Account would not balance. Assessment Questions (cont.)