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INTL 2200 Lecture Notes - Lecture 10: Special Drawing Rights

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ivorygnu895
25 Mar 2016
School
York University
Department
International
Course
INTL 2200
Professor
Mokhles Hossain

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Document Summary

Record of all international transactions between nation and rest of the world. Trade occurs in goods, services, assets (financial assets), no constraints on amount imported or amount exported. We can run a surplus or deficit if needed. Receipts: exports of goods/services + inflow of investment income + inflow of government transfers. Payments: imports of good/services + outflow of investment income + outflow of government transfers. Theory: (double-entry bookkeeping, not necessarily true in practice) Current account balance + capital/financial balance = 0. Therefore: if current account is surplus, then capital/financial will have the same amount in magnitude in deficit, and vice versa. Reason why current account balance + capital/financial balance = 0 is because dr/cr will always be equal (think like accounting). Any transaction that gives rise to a receipt from abroad is recorded on credit (+); anything that is shipped out (exports)

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Related Questions

QUESTION 10

Below is a table for the Balance of Payments of Goegania, a prosperous island nation.

Current Account   Financial Account
Exports of Goods $1,940   Capital Inflow $661  
Imports of Goods ???   Capital Outflow $347  
Trade Balance   ??? Financial Account   ???
Exports of Services $569   Capital Account   $0
Imports of Services ???   Statistical Discrepancy   $0
Services Balance   $16 Balance of Payments   ???
Income Received on Investments $704        
Income Paid on Investments $505        
Net Income on Investments   ???      
Net Transfers   $-168      
The balance on the Current Account   ???      

Given this information, what is the value for the imports of goods?

Sometimes this question generates some weird numbers. Remember that you would always add the values in a category to get the total. So the total for the Financial Account is always Capital Inflow + Capital Outflow and the Trade Balance is always Exports + Imports for this table. It's just that sometimes those values being added are negative. If you get a negative answer, you should enter in the negative.

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.

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.