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24 March, 18:07

Based on the following information, what is the balance on the current account? Exports of goods and services = $12 billion Imports of goods and services = $14 billion Net income on investments = minus $4 billion Net transfers = minus $1 billion Increase in foreign holdings of assets in the United States = $6 billion Increase in U. S. holdings of assets in foreign countries = $3 billion A. minus $7 billion B. minus $3 billion C. minus $2 billion D. $1 billion

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Answers (2)
  1. 24 March, 20:39
    0
    -$7billion

    Explanation:

    Given that

    Exports of goods and services=$12 billion

    Imports of goods and services=$14 billion

    Net income on investments = - $4 billion

    Net transfers = - $1 billion

    Increase in foreign holdings of assets in the United States = $6 billion

    Increase in U. S. holdings of assets in foreign countries = $3 billion

    Recall that

    CAB = (X - M) + NY + NCT

    Where

    X = export

    M = import

    CAB = current account balance

    NY = net income from abroad

    NCT = net current transfers

    Therefore

    CAB = (12 - 14) - 1 - 4

    = - $7 billion
  2. 24 March, 20:59
    0
    Answer: The answer is A. - $7billion

    Explanation:

    From the question above, we have the following parameters:

    Exports of goods and services=$12 billion

    Imports of goods and services=$14 billion

    Net income on investments = - $4 billion

    Net transfers = - $1 billion

    Increase in foreign holdings of assets in the United States = $6 billion

    Increase in U. S. holdings of assets in foreign countries = $3 billion

    The formula for calculating Current Account Balance is given as:

    CAB = (X - M) + NY + NCT

    Where

    CAB = current account balance

    X = export

    M = import

    NY = net income from abroad

    NCT = net current transfers

    Therefore, we have:

    CAB = (12 - 14) - 1 - 4 = - $7 billion.

    Therefore, our answer is A.
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