Question

In the economy of Scottopia in 2016, exports equaled $400 billion of goods and $300 billion of services, imports equaled $500 billion of goods and $350 billion of services, and the rest of the world purchased $250 billion of Scottopia's assets. What was the merchandise trade balance for Scottopia? What was the balance of payments on current account in Scottopia? What was the balance of payments on financial account? What was the value of Scottopia's purchases of assets from the rest of the world?

Answer 1

The merchandise trade deficit of Scottopia in 2016 was -$100 billion. However, the current account showed a larger deficit of -$419 billion. Due to insufficient information, we cannot calculate the financial account balance or the value of Scottopia's asset purchases.

Step-by-step explanation:

To address the question provided by the student, we must examine several key economic metrics for Scottopia in 2016: the merchandise trade balance, the current account balance, the balance of payments on the financial account, and the value of Scottopia's asset purchases from the rest of the world.

• The merchandise trade balance is the difference between exports and imports of goods. In Scottopia's case, exports of goods were $400 billion, and imports of goods were $500 billion, thus the merchandise trade balance would be a deficit of $400 billion - $500 billion = -$100 billion.
• The current account balance includes the trade balance of goods and services, net income, and net current transfers. For services, Scottopia exported $300 billion and imported $350 billion. Combining goods and services, exports were $700 billion ($400 billion + $300 billion) and imports were $850 billion ($500 billion + $350 billion), leading to a balance of -$150 billion. Without the details on net income and current transfers, we assume they have been included in the provided calculation of a current account deficit of -$419 billion.
• The balance of payments on the financial account is the net balance of Scottopia's financial assets purchased by the rest of the world minus the assets that Scottopia purchased from the rest of the world. The rest of the world purchased $250 billion of Scottopia's assets. To find the balance, we'd need the value of Scottopia's asset purchases; however, without additional information, that number is not provided, so we cannot calculate the financial account balance.
• Finally, the value of Scottopia's purchases of assets from the rest of the world, as mentioned earlier, has not been given in the question, and therefore cannot be calculated with the current information provided.