Answer:
Part (a)
Net change in Government international reserves is computed by adding up the balances in Current Account and Capital Account. The recent figures are available for the first quarter of 2014. Data indicates that the Current Account deficit in 2014 : Q1 amounted to $111.15 billion and Capital Account deficit was $0.12 billion. Together, the net change in Government international reserves in the first quarter of 2014 was $111.27 billion.
In contrast, the figures for the same set of variables, five years ago, were $96.78 billion and $0.12 billion. Together, net change in Government international reserves was $96.9 billion.
Because the net change in Government international reserves in both periods was negative and it was increasing in nature, it implies a deficit. A deficit in the net foreign wealth of the United States suggests that Americans are reducing their holdings in of foreign assets and foreign countries are increasing their claims on the United States.
Part (b)
The fact that dollar is used as international reserve currency, a deficit in net foreign wealth of the United States will depreciate the currency as the exports gets impeded by rising imports. With Chinese yuan being in the hunt for becoming the international reserve currency, these facts will mitigate the financial clout of U.S. dollar.