Categorize each transaction according to the U. S. account to which it belongs and the direction the money flows. Account Direction of flow An Australian company buys steel from a U. S. firm. The Federal Reserve buys $2 billion worth of euros. Profits are earned by a U. S. based mining company operating in Mexico. An English company purchases a U. S. confectionary manufacturer.

The answers are (1) Current account, payment from foreigners (2) Financial account, payment to foreigners (3) Current account, payment from foreigners (4) Financial account, payment from foreigners.

Explanation:

Solution

Now, when dollars enters from the rest of the world into the United States, this is a payment from foreigners, also when dollars flow form The United States to the rest of the world, this is a payment to foreigners.

The sale and purchase of goods and services is recorded or captured in a current account. the flow of capital is captured in a financial account. now from the analysis above the answers is given below:

(1) An Australian company buys steel from a U. S. firm.

Answer : Current account, payment from foreigners

(2) $2 billion euros worth is bought by the Federal Reserve

Answer : Financial account, payment to foreigners

(3) Profits are earned by a U. S. based mining company operating in Mexico.

Answer : Current account, payment from foreigners

(4) n English company purchases a U. S. confectionary manufacturer.

Answer: Financial account, payment from foreigners.