Question

d) Suppose Mexico’s purchases of rest-of-world assets equal $500 billion ($ is the symbol for the peso, Mexico’s currency), rest-of-world purchases of Mexico’s assets equal $700 billion, and Mexico’s imports equal $550 billion. What is Mexico’s balance on capital account? Its balance on current account? Its total exports?

Answer 1

Balance on capital account = Rest-of-world purchases of Mexico’s assets - Mexico’s purchases of rest-of-world assets

                                            = 700 - 500

                                            = $200 billion

Balance on current account = - (Balance on capital account)

                                             = -$200 billion

Current account balance = Export - Import

-200 = Export - 550

Export = 550 - 200

           = $350 billion

Thus, total exports = $350 billion