$$\begin{array} { | l | r | }
\hline \text { (1) Goods Exports } & + \$ 200 \
\hline \text { (2) Balance on Capital Account } & 0 \
\hline \text { (3) Net Transfers } & 0 \
\hline \text { (4) Imports of Services } & - 100 \
\hline \text { (5) Net Investment Income } & 0 \
\hline \text { (6) US Purchases of Assets Abroad } & - 50 \
\hline \text { (7) Goods Imports } & - 250 \
\hline \text { (8) Foreign Purchases of Assets in the US } & + 150 \
\hline \text { (9) Exports of Services } & + 50 \
\hline
\end{array}$$ The plus items in the table are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo. Zippo has a
A) current account de?cit.
B) capital account de?cit.
C) balance of payments de?cit.
D) trade surplus on goods and services.

Question

$$\begin{array} { | l | r | } 
\hline \text { (1) Goods Exports } & + \$ 200 \
\hline \text { (2) Balance on Capital Account } & 0 \
\hline \text { (3) Net Transfers } & 0 \
\hline \text { (4) Imports of Services } & - 100 \
\hline \text { (5) Net Investment Income } & 0 \
\hline \text { (6) US Purchases of Assets Abroad } & - 50 \
\hline \text { (7) Goods Imports } & - 250 \
\hline \text { (8) Foreign Purchases of Assets in the US } & + 150 \
\hline \text { (9) Exports of Services } & + 50 \
\hline
\end{array}$$ The plus items in the table are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo. Zippo has a
A) current account de?cit.
B) capital account de?cit.
C) balance of payments de?cit.
D) trade surplus on goods and services.

Quizplus · Accepted Answer

The current account consists of goods exports (1), imports of services (4), net transfers (3), and exports of services (9). The sum of these items is (+200) + (-100) + 0 + (+50) = +150. This means that Zippo has a surplus on the current account. However, the capital account consists of balance on capital account (2), net investment income (5), US purchases of assets abroad (6), and foreign purchases of assets in the US (8), which sum up to 0 + 0 + (-50) + 150 = +100. This means that Zippo has a surplus on the capital account. Together, the current account surplus and the capital account surplus should equal zero. However, in this case, the sum is not equal to zero, which implies that there is a statistical discrepancy or an error in measurement. Therefore, Zippo has a current account deficit.

The Plus Items in the Table Are "Export-Type" Entries and