Question

Based on the following​ information, what is the balance on the current​ account? Exports of goods and services​ = $12 billion Imports of goods and​ services= $14 billion Net income on investments​ = minus​$4 billion Net transfers​ = minus​$1 billion Increase in foreign holdings of assets in the United States​ = $6 billion Increase in U.S. holdings of assets in foreign countries​ = $3 billion A. minus​$7 billion B. minus​$3 billion C. minus​$2 billion D. ​$1 billion

Answer 1

Answer: The answer is A. -$7billion

Explanation:

From the question above, we have the following parameters:

Exports of goods and services=$12 billion

Imports of goods and services=$14 billion

Net income on investments= -$4 billion

Net transfers= -$1 billion

Increase in foreign holdings of assets in the United States= $6 billion

Increase in U.S. holdings of assets in foreign countries= $3 billion

The formula for calculating Current Account Balance is given as:

CAB = (X - M) + NY + NCT

Where

CAB = current account balance

X = export

M = import

NY = net income from abroad

NCT = net current transfers

Therefore, we have:

CAB = (12 - 14) - 1 - 4 = - $7 billion.

Therefore, our answer is A.

Answer 2

Answer:

-$7billion

Explanation:

Given that

Exports of goods and services=$12 billion

Imports of goods and services=$14 billion

Net income on investments= -$4 billion

Net transfers= -$1 billion

Increase in foreign holdings of assets in the United States= $6 billion

Increase in U.S. holdings of assets in foreign countries= $3 billion

Recall that

CAB = (X - M) + NY + NCT

Where

X = export

M = import

CAB = current account balance

NY = net income from abroad

NCT = net current transfers

Therefore

CAB = (12 - 14) - 1 - 4

= - $7 billion