Question

Determine whether or not each of the following transactions constitutes a BOP entry. If a transaction constitutes a BOP entry, indicate whether it can be described as a debit ora credit in the BOP for the U.S. Justify all your responses.

i) Mr. Smith, a resident of Wichita, Kansas in the U.S. buys a new Chevrolet Suburban from a local dealership.

ii) Mr. Smith also buys solar panels from his friend, Mr. Wu, who is a resident of Chifeng, China.

iii) Mr. Smith buys a Hainan Airlines plane ticket for Mr. Wu to come visit him in Wichita. Hainan Airlines is a Chinese firm.

iv) While in Wichita, Mr. Wu buys two tickets to a Wichita State men’s basketball game, for he and Mr. Smith.

v) At the end of his visit, Mr. Wu buys a ticket from United Airlines to fly back to China.

Answer 1

i) purchase of New Chevrolet Suburban by Mr. Smith from a local dealership does not constitute a BoP entry.

ii) Mr. Smith's Purchase of solar panels from his Chinese friend Mr. Wu. This transaction constitute a BoP entry and Since this involves the Payment done to Chinese Resident, it would be regarded as a debit in the BOP for US.

iii) Hainan Airlines is a chinese Firm from which Mr. Smith has bought a plane ticket. This will constitute a BOP entry and would regarded as a debit because Mr. Would have done a Payment to the Chinese firm Hainan Airlines.

iv) Mr. Wu has bought tickets here in US and Therefore has bought the Good or service of US(ticket to the game). Therefore, this entry constitute a BOP entry and would be regarded as a Credit because a Chinese resident has paid to the US firm for the purchase of the good or service.

v) Mr. Wu buys a ticket from United Airline(an American firm). This will constitute a BOP entry and would be regarded as a Credit since the payment would be made by the Chinese Resident to the US firm for the ticket Chinese resident purchased.