International Economics Exam

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International Economics Final Exam
Chapter 10
Use the information in the following table on Switzerland’s 1998 international transactions to answer the following question (amounts are in millions of dollars)
BOP Account Amount
Merchandise Imports 92, 871
Merchandise Exports 93,859
Services Imports 15,406
Services Exports 26,683
Investment Income receipts 43, 720
Investment Income payments 27, 702
Unilateral Transfers (-) 3,736
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Calculate the trade balance? 4 points
The trade balance shows the difference between exports and imports in a country on goods and services, it is also known as net exports. Merchandise trade balance only shows the net imports of merchandise goods.
creditsdebits Trade balanceExportsMerchandise93,859Services26,683Total 120,542Imports Merchandise-92,871Services-15,406Total (108,277)Trade balance12,265
b. Calculate the current account balance? 4 points

creditsdebitsCurrent account ExportsMerchandise93,859Services26,683investment income receipts43, 720total164,262Imports Merchandise-92,871Services-15,406investment income payments-27,702total(135,979)Unilateral Transfers-3,736Current balance Account 24547
Did Switzerland become a larger international net creditor during 1998? 2 points
The current, capital, and balancing account are components of the balance of payments; receipts represent flows of foreign currency in the nation while payments are outflows. A net creditor nation typically invests resources in other countries out of surplus accounts. Thus, a net creditor nation has more assets held abroad than the value of foreign owned assets held in the country (Carbaugh, 364). The surplus (positive) current account balance of Switzerland shows that the nation is a net creditor. However, there is a need to look for more information on capital and balancing account, which may result to a deficit lance of payments.
2. Chapter 11
a) A US $ costs 0.6 British Pound but the same dollar can be purchased for 1800 Italian Lira. What is the Lira/Pound exchange rate? 5 points
1 $= 0.6 Pounds and 1$= 1800 Lira, thus 1, 800 Italian Liras are equal to 0.6 British pounds. One British pound is equal to 1800/ 0.6= 3000 Italian Liras is 1/ 1,000 which is 0.000333.
b) Suppose that on January 1, one Dollar exchanges for 100 Yen. If a Big Mac costs $2.40 in the US a...