Question

) Suppose a country has the following balance of payments data. Exports of goods 100 Imports of goods 130 Service exports 60 Service imports 50 Income receipts from abroad 75 Income payments to foreigners 115 Increase in home country assets abroad 130 Increase in foreign assets in home country 190 (a) Calculate the current account balance. (b) Calculate the financial account balance. (c) Calculate the trade balance. (d) Calculate net factor payments

Answer 1

Answer: please see answer below

Step-by-step explanation:

given

Exports of goods 100, Imports of goods 130

Service exports 60 , Service imports 50

Income receipts from abroad 75 , Income payments to foreigners 115 Increase in home country assets abroad 130 Increase in foreign assets in home country 190

solution

Current account balance = (Export-Imports) + net transfer payments

=export of goods + service payments= 100+60=160

import of goods + service payments= 130+50=180

(160-180) + (75-115) = -20+-40 =-20-40= -60

b) Financial account balance = 130-190 = -60 (Foreign assets in home country is higher than home assets abroad , this will lead to decrease in the overall financial account).

c) trade balance = Exports-imports = 160-180 = -20

d) net factor payments = factor payment received abroad - factor payments paid abroad = 75-115 = -40