To explain:Transaction’s category that appears in current account, current account balance, relationship between net exports and current account balance.
Explanation of Solution
The balance of payment account records all the transactions in the different accounts for instance, the current account records the transections related to merchandise, service, income and unilateral transfers accounts. However, the current account balance refers to the sum of all these transactions.
The current account balance and net export are positively related. If the value of net export is lower, then the value of the current account balance will also be lower. However, the negative value of net export will lead to a deficit in the current account balance.
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Chapter 5 Solutions
Macroeconomics (9th Global Edition)
- In 2001, the United Kingdoms economy exported goods worth 192 billion and services worth another 77 billion. It imported goods worth 225 billion and services worth £66 billion. Receipts of income from abroad were 140 billion while income payments going abroad were 131 billion. Government transfers from the United Kingdom to the rest of the world were 23 billion, while various U.K government agencies received payments of 16 billion from the rest of the world. Calculate the U.K. merchandise trade deficit for 2001. Calculate the current account balance for 2001. Explain how you decided whether payments on foreign investment and government transfers counted on the positive or the negative side of the current account balance for the United Kingdom in 2001.arrow_forwardThe GDP for the United States is 18,036 billion and its current account balance is 484 billion. What percent of GDP is the current account balance?arrow_forwardWhat is included in the current account balance?arrow_forward
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