Part One: Balance of Payments This worksheet makes use of two tables of data. Th
ID: 1122075 • Letter: P
Question
Part One: Balance of Payments
This worksheet makes use of two tables of data. The first table, the Lukistan Balance of Payments data lists various components of the Balance of Payments as reported by government. Some of these items are detailed accounts and some are summary accounts of the other detailed accounts. Answer questions 1-5 using the Lukistan Balance of Payments data. As always, you should submit your answers in the Learning management system for your school (D2L at LCC).
($)
+ 440
+ 280
+ 40
+ 120
– 490
– 360
– 60
– 70
– 11
– 26
+ 80
– 14
+ 21
Questions 1-5:
When entering answers, use the same formatting you see in the table.
The Lukistan merchandise trade balance equals __________ billions of dollars.
The Lukistan current account balance equals __________ billions of dollars.
The Lukistan capital account balance equals __________ billions of dollars (include changes in official reserves as part of capital flows).
Lukistan is experiencing a trade____________ (multiple choice).
The sum of the balance of payments for Lukistan, including both the current account, the capital account, and the statistical discrepancy is:
Lukistan Balance of Payments Components of the Balance of Payments($)
Exports of goods and services+ 440
Merchandise exports (including military sales)+ 280
Exports of services+ 40
Income Received from U.S. assets abroad+ 120
Imports of goods and services– 490
Merchandise imports (including military purchases)– 360
Imports of services– 60
Income Received from foreign assets in U.S.– 70
Net unilateral transfers abroad– 11
Outflow of U.S. capital– 26
Inflow of foreign capital+ 80
Increase in U.S. official reserve assets– 14
Increase in foreign official assets in U.S.+ 21
Explanation / Answer
Answer:
1. The Lukistan merchandise trade balance equals __________ billions of dollars.
Trade balance of any item is calculated by subtracting imports from exports. Here, we are given merchandise exports equal $280 billion and merchandise imports are $360 billion.
Therefore, merchandise trade balance = Exports - Imports of merchandise
= 280 - 360
= -80 billions of dollars.
2. The Lukistan current account balance equals __________ billions of dollars.
Current account comprises of trade of goods or merchandise as well as trade of services.
Current account balance = Exports of goods and services - Imports of goods and services
= 440 - 490
= - 50 billions of dollars
3. The Lukistan capital account balance equals __________ billions of dollars (include changes in official reserves as part of capital flows).
Capital account balance including changes in official reserves:
Capital account balance = Inflow of capital - Outflow of capital
= 80 - 26
= 54 billions of dollars
Changes in official reserves = - 14 billions of dollars
Inluding this amount, capital account balance = 54 - 14
= 40 billions of dollars
4. Lukistan is experiencing a trade____________ (multiple choice).
To determine whether Lukistan is experiencing trade balance deficit or surplus, add all inflows of money and capital (by adding all '+' numbers) and all outflows of money and capital (by adding all '-' numbers).
Inflows = 440 + 280 + 40 + 120 + 80 + 21 = + 981
Outflows = (490 + 360 + 60 + 70 + 11 + 26 + 14) = 1031
Balance of payments = Inflows - Outflows
= 981 - 1031
= -50 billions of dollars
Since the balance of payments amount is a negative number, the country is experiencing a trade deficit.