Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is the value of Grovner's
Jassets purchased by foreigners?

Question

Quizplus · Accepted Answer

According to the balance of payments equation, the current account (exports minus imports) plus the capital account (net purchases of foreign assets) must equal zero. Therefore, Grovner's assets purchased by foreigners can be calculated by subtracting the current account balance (exports minus imports) from Jpurchases of foreign assets by its citizens.

Assets purchased by foreigners = Jpurchases of foreign assets by Grovner's citizens - (Grovner's exports - Grovner's imports)
Assets purchased by foreigners = $900 billion - ($950 billion - $1,000 billion)
Assets purchased by foreigners = $900 billion - (-$50 billion)
Assets purchased by foreigners = $850 billion

Therefore, the correct answer is C) $850 billion.

Suppose Grovner's Exports Equal $950 Billion, Its Imports Equal $1,000