Question

The following table contains data for the U.S. balance of payments in a prior year. Answer the question on the basis of this information. All figures are in billions of dollars. U.S. goods exports +$793 U.S. goods imports -1573 U.S. exports of service +280 U.S. imports of services -222 Net investment income +5 Net transfers -81 Capital account -5 Foreign purchases of assets in the U.S. +1198 U.S. purchases of foreign assets -395 Refer to the table above. The data indicate that Americans:

a)Earned more from their investments abroad than foreigners earned from their investments in America

b)Sold more products to buyers abroad than what foreign producers sold to buyers in America

c)Bought foreign assets abroad more than foreigners bought assets in the U.S.

d)Invested abroad more than foreigners invested in America

Answer 1

We discuss all the options. Starting from below

d) Americans invested abroad more than foreigners invested in America

We have, Capital account = -5

This shows that Americans invested abroad more than foreigners invested in America. So, this option is correct.

C) Americans bought foreign assets abroad more than foreigners bought assets in the U.S.

We have, Foreign purchases of assets in the U.S. = +1198

U.S. purchases of foreign assets= -395

Considering the absolute values,

This shows that foreigners bought assets in the U.S more than Americans bought foreign assets abroad. So, this option is wrong.

b) Americans Sold more products to buyers abroad than what foreign producers sold to buyers in America.

U.S. goods & services exports = +$793+ 280 = $1073

U.S. goods & services imports = -1573- 222 = $1351

So, this statement is false as Exports are less than Imports

A) Americans Earned more from their investments abroad than foreigners earned from their investments in America.

Net investment income = +5

This shows that this statement is true.