Question

China had a $214 billion overall current account surplus in 2012. Assuming that China’s net debt forgiveness was zero in 2012 (its capital account balance was zero), what was the net balance of Chinna's financial account balance?

Instructions: Enter your answer as a whole number. If you are entering a negative number be sure to include a negative sign (-) in front of that number.

$ ________ billion.

Answer 1

The current account balance can be calculated using the national saving and investment identity. The formula is: Current Account Balance = Total Domestic Savings - Total Domestic Physical Capital Investment - Government Budget Deficit.

Step-by-step explanation:

The current account balance can be calculated using the national saving and investment identity. The formula is: Current Account Balance = Total Domestic Savings - Total Domestic Physical Capital Investment - Government Budget Deficit. In this case, the government budget deficit is $100 billion, total domestic savings is $1,500 billion, and total domestic physical capital investment is $1,600 billion.

Using the formula, the current account balance would be: Current Account Balance = $1,500 billion - $1,600 billion - $100 billion = -$200 billion.

If the investment rises by $50 billion, while the budget deficit and national savings remain the same, the new current account balance would be: Current Account Balance = $1,500 billion - $1,650 billion - $100 billion = -$250 billion.

Answer 2

The correct asnwer is $-214 billion.

Step-by-step explanation:

A surplus occurs when an account exceeds the credit after having paid all its debts and obligations.

As the example says, assuming that China’s net debt forgiveness was zero in 2012, then the net balance of China's financial account balance would be -214 billion.

This means that China would be facing a deficit.

A defit means that more money comes out of our company's account than it enters.

Which causes China to have a negative balance account.