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Chapter 33: Q. 33.1LO (page 732)

Distinguish between the balance of trade and the balance of payments and identify the key accounts within the balance of payments

Short Answer

Expert verified

It keeps a list of the state's global money transaction on items, activities, and revenue out over length of every year.

Step by step solution

01

Introduction

The balance of trade, is really a monetary representation that describes what a region exports from the rest of the planet.

The balance of payment, is really a current account that chronicles its all of economy exchanges the with rest of the planet.

02

Given Information

The BoT encompasses commercial transactions items. BoP includes money with payments, assets, and labor.

03

Explanation

The balance in between input and output of items is defined as balance of trade (BoT).

The imbalance between entry and exit of exchange rates is termed as balance of payments (BoP).

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Most popular questions from this chapter

Suppose that signs of an improvement in the Japanese economy lead international investors to resume lending to the Japanese government and businesses. How would this event affect the market for the yen? How should the central bank, the Bank of Japan, respond to this event if it wants to keep the value of the yen unchanged?

Understand how policymakers can go about attempting to fix exchange rates

Why do you suppose that foreign expenditures on U.S. exports declined during 2015?

Determine if each of the following items results in a surplus or deficit in the current account of the balance of payments.

a. A Central European corporation offers products to a chain of hobby stores in the United States.

b. Japanese citizens pay a U.S. travel agency to arrange hotel accommodations, ground transportation, and tours of many U.S. cities, including New York, Chicago, and Orlando.

c. A Mexican corporation hires an accounting firm in the United States to audit its financial accounts.

d. Following a severe earthquake in Pakistan, churches and mosques in the United States contribute humanitarian aid to the country.

e. A Canadian corporation supplies raw materials to a US microprocessor maker.

Identify whether each of the following items creates a surplus item or a deficit item in the current account of the U.S. balance of payments.

a. A Central European company sells products to a U.S. hobby-store chain.

b. Japanese residents pay a U.S. travel company to arrange hotel stays, ground transportation, and tours of various U.S. cities, including New York, Chicago, and Orlando.

c. A Mexican company pays a U.S. accounting firm to audit its income statements.

d. U.S. churches and mosques send relief aid to Pakistan following a major earthquake in that nation.

e. A U.S. microprocessor manufacturer purchases raw materials from a Canadian firm.
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