A major hurricane damages the infrastructure in Econia. In response, Macroland sends $5 million in aid to Econia. How does this show up in Macroland's balance of payments accounts?

Question

Quizplus · Accepted Answer

This transaction is recorded as a negative amount in Macroland's current account because it represents a transfer payment to another country, reducing Macroland's net income and increasing its spending without receiving any goods or services in return.

A Major Hurricane Damages the Infrastructure in Econia