Instructor’s Manual
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in
1. The balance of payments is a record of the monetary transactions between residents of one country
and the rest of the world that occur over the course of a one–year period.
2. The receipt of dollars from foreigners results from the following transactions: (1) merchandise exports,
(2) transportation-travel receipts, (3) income received from foreign investments abroad, (4) gifts
received from foreign residents, (5) aid received from foreign governments, and (6) investments in the
3. Because the balance-of-payments statement utilizes a double-entry booking system, in which each
credit entry is balanced by a debit entry, the overall balance of payments must numerically balance.
4. Balance-of-payments transactions are grouped into two categories: (1) the current account which
refers to the monetary value of international flows associated with flows in goods, services, income,
5. Official reserve assets consist of gold, Special Drawing Rights, reserve positions in the International
6. A merchandise trade surplus suggests that the home country is a net exporter of merchandise. A
goods and services surplus suggests that the home country transfers more real resources (goods and
Instructor’s Manual
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in
7. If the surplus balance on the service account exceeds the deficit balance on the merchandise (goods)
account, the goods and services balance will be in surplus.
8. The balance of international indebtedness indicates the international investment position of a country
at one moment in time. The balance of payments indicates all of the international monetary
9. a-debit; b-credit; c-credit; d-debit; e-debit; f-debit; g-credit; h-debit; i-debit.
10. a. Merchandise trade balance, $75 billion deficit. Services balance, $60 billion surplus. Goods
and services balance, $15 billion deficit. Investment income balance, $5 billion surplus.
Unilateral transfers balance, $20 billion deficit. Current account balance, $30 billion deficit.
11. Net debtor nation of the amount of $25 billion (250 billion in foreign-owned assets in the U.S. and 225
billion in U.S. government assets abroad)