Balance of Payments
Explain how each of the following transactions generates two
entries–a credit and a debit–in the American balance of payments accounts,
and describe how each entry would be classified:
a. An American buys a share of German stock, paid for by
writing a check on an account with a Swiss bank.
b. An American buys a share of German stock, paying the
seller with a check on an American bank.
c. The French government carries out an official foreign
exchange intervention in which it uses dollars held in an American bank to buy
French currency from its citizens.
d. A tourist from Detroit buys a meal at an expensive
restaurant in Lyons, France, paying with a traveler’s check.
e. A California winegrower contributes a case of cabernet
sauvignon for a London wine tasting.
f. A U.S. owned factory in Britain uses local earnings to
buy additional machinery.
