ECO100Y5 Lecture Notes - Lecture 40: Foreign Portfolio Investment, Open Economy, Capital Account

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Balance of payments payments received by canadian residents are positive entries payments made by canadian residents are negative entries. Current account + financial account + capital account. Current account = net exports + net income on investment + net transfers. Net exports is balance of trade + value of goods exported . Net exports is balance of services + value of services exported value of goods imported value of services imported. Financial account = foreign purchases of domestic assets (capital inflows) - domestic purchases of assets abroad (capital outflows) Financial account = - net foreign investment = net foreign investment (physical assets) + net foreign portfolio investment (financial assets) Capital account = migrant transfers + sales and purchases of non- produced, nonfinancial assets (i. e. patents) If a country has a positive current account balance, they have excess foreign currency, which they can either hold onto or invest back in foreign countries. Both are negative entries in the financial account.

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Balance of payments: Using the following data for a given year, calculate

Item	Value
The rise in the country's private financial assets abroad	623
Imports of merchandise	782
Investment income, net	-27
Transfers, net	-15
Export of services	504
Rise in foreign private financial assets in the country	580
Exports of merchandise	903
Rise in foreign governments financial assets in the country	224
Imports of services	735
Rise in-country government s financial assets abroad	29

(a) The current account balance.

(b) The financial account balance.

viridianmosquito185

In 1995, the U.S. economy imported $750 billion in goods and exported $576 billion in goods. However, it exported $219 billion in services and imported $141 billion in services. Receipts of income from abroad were $211 billion while income payments going abroad were $191 billion. Unilateral transfers from the United States to other countries were $34 billion. Calculate the merchandise trade deficit for 1995. Calculate the current account balance for 1995. Also, explain how you decided whether payments on foreign investment and unilateral transfers counted on the positive or the negative side of the current account balance.

bronzetrout874

Exports of goods & services	$1000
Imports of goods & services	$800
The net change in assets owned abroad	$590
The net change in foreign-owned assets at home	$400
Unilateral transfers received	$100
Unilateral transfers paid	$200
Investment income paid to foreigners	$300
Investment income received from foreigners	$400
The balance on the capital account	$0

1. The balance on the current account is A) $100. B) $200. C) 0. D) - $100

2. The balance on the financial account is A) -$90. B) -$190. C) $100. D) $200

3. The statistical discrepancy is A) -$5. B) $5. C) $10. D) -$10

4. From the domestic economy's perspective,

A) there is a net international capital inflow equal to $190.

B) there is a net international capital outflow equal to $190.

C) the net international capital flow is zero.

D) its domestic absorption exceeds its GNP by $200.

orangewildebeest926

ECO100Y5 Lecture Notes - Lecture 40: Foreign Portfolio Investment, Open Economy, Capital Account

ECO100Y5 Full Course Notes

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