Question

U.S. international transactions are recorded in the balance of payments. Identify if each of the following transactions would be recorded as an increase or decrease in the balance of payments current or financial account for the United States. A wealthy entrepreneur purchases a new car directly from British Motor Works. A U.S. manufacturer purchases recording equipment from Germany. How would an increase in U.S. price level impact the current account

Answer 1

Answer:

(1) The Financial account will increase when wealthy entrepreneur purchases a new car directly from British Motor Works, it means an American purchased something abroad.

(2) The Financial account will increase when a U.S. manufacturer purchases recording equipment from Germany.

(3) When the U.S price level increases, the deficit current account of the U.S will increase.

Explanation:The balance of payments also known as balance of international payment is an economic term in International finance which describes the amount of Financial transactions taking place between business Organisations of a given country with that of other countries of the world over a specific period of time which can either be quarterly, biannual or annual.

THE FINANCIAL ACCOUNTS OF A COUNTRY INCREASES IF ORGANISATIONS OR INDIVIDUALS WITHIN A COUNTRY MAKE PURCHASES FROM OUTSIDE.