Finance, Forex and Investments

AP Economics Question? I really need help?

2. Balance of payments accounts record all of a country’s international transactions during a year. (a) Two major subaccounts in the balance of payments accounts are the current account and the capital account. In which of these subaccounts will each of the following transactions be recorded? (2 points) (i) A United States resident buys chocolate from Belgium. (ii) A United States manufacturer buys computer equipment from Japan. (b) How would an increase in the real income in the United States affect the United States current account balance? Explain. (2 points) (c) Using a correctly labeled graph of the foreign exchange market for the United States dollar, show how an increase in United States firms’ direct investment in India will affect the value of the United States dollar relative to the Indian currency (the rupee). (2 points)

Public Comments

1. A - Current account - i Capital account - ii B - As the M0 increases the current account will be able to take on more assets. C I don't feel like making a graph, but the dollar will depreciate against the rupee as capital is redirected into India.