Problems

Answer questions 1(a) through 1(c) using example 3.1.

(a) Prepare the balance of payments in a good form.

(b) Does the country have a balance-of-payments deficit or surplus?

(c) How can the country account for this payments imbalance?

Assume that a country has a current-account deficit of $10,000 and a financial-account surplus of $12,000. Assume that the capital account and net errors and omissions are negligible.

(a) Does the country have a balance-of-payments deficit or surplus?

(b) What will happen to the country's official reserve account?

A country has a merchandise trade surplus of $5,000, an income balance of zero, a current transfer surplus of $3,000, and a current-account deficit of $4,000. What is the service trade balance?

Assume that: (1) a country has a current-account surplus of $10,000; (2) its financial account has a deficit of $15,000; and (3) its other two accounts - the capital account and net errors and omissions - are negligible. What is the balance of the country's reserve account? How can the country eliminate the $5,000 imbalance on its balance of payments?

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