Suppose that a developing country receives foreign aid in the form of a shipment of wheat. Balance-of-payments accountants in that country would record the "debit" item in their accounts as __________ and the credit item as __________.

Question

Quizplus · Accepted Answer

When a developing country receives foreign aid in the form of a shipment of wheat, the wheat is considered an imported good. Therefore it will be recorded as a debit item in the balance-of-payments accounts. The foreign aid is considered a unilateral transfer received because it is a gift and does not require anything in return, thus it will be recorded as a credit item. Therefore, the correct answer is "imports of goods"; "unilateral transfers received". Choice C is the only option that provides this combination of debit and credit items.

Suppose That a Developing Country Receives Foreign Aid in the Form