Question

Consider the following events:

• Overseas telecommunication companies are paying $400,000 to US filmmakers for broadcasting TV shows.

• Morgan Stanley bought US Treasury Bills worth $1 Billion.

• A Canadian liquor store LCBO sold ice vine worth $100,000, $30,000 of which was sold to US customers.

• A US telecom company bought patents from Nokia (Finland) for $1 million.

• Wells Fargo received $500,000 in dividends from overseas holdings.

• US Government contributed $100,000 to the BIRD foundation sponsoring research at Tel Aviv University.

• A senior residing in New York moved to the Orange County and brought the retirement savings worth $700,000.

• Crédit Agricole, a major French bank, purchased shares of a US-based pharmaceutical company for $800,000

What is the net of the capital account?

Answer 1

NET CAPITAL ACCOUNT = -1,000,000

Balance of Payment or also known as Balance of international Payments , includes the transactions which is made with/by nonresidents , On that basis some of the points in Questions does not make any changes to the balance of payment

These are-

1.Morgan Stanley Bought US Treasury Bills worth $1 Billion , Morgan Stanley is the US based company

2.A Senior residing in New York Moved to the Orange County and brought the retirement savings worth 700,000, He is only Changing states but is still in the USA

1)Current +400,000

2)Not in balance of Payment

3)Current -30,000

4)Capital -1,000,000

5)Current +500,000

6)Current -100,000

7)Not in balance of Payment

8)Financial +800,000

THERE IS ONLY ONE TRANSACTION IN CAPITAL ACCOUNT OF -1,000,000 THEREFORE NET CAPITAL ACCOUNT IS -1,000,000

• A US telecom company bought patents from Nokia (Finland) for $1 million.