Describe how each of the following transactions affects the U. S. Current Account (increase or decrease in the Trade Balance, Net Payments from Abroad, or Net Unilateral Transfers), and in the external wealth or net foreign assets (increase or decrease) Example of a transaction: US exports 2,000,000 dollars worth of computers to Mexico. Mexico pays in US dollars. Current account increases by 2,000,000 (trade balance), and net foreign assets rise by 2,000,000 (higher US dollar reserves).

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Explanation:

Solution

Given that:

The Current Account  will decrease or reduce by 120000, net foreign assets decrease. Nothing  changes, he stocks were earlier with an American company too. The Current account increases,  there will be no change in net foreign assets (since the check was drawn on a US bank, it means the Spanish person had already had the money in US only). Nothing changes, the wine was bought, from Italy, already by the restaurant. The Current account decreases by 3500, foreign assets decrease by the same amount. The Current account increases, there is no change in assets since the money was already transferred.

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