Jane has just sent a gift that was made in the U.S. to her relatives in Italy. As far as the balance of payments is concerned this gift will

Question

Quizplus · Accepted Answer

The gift that Jane sent to Italy is classified as a unilateral transfer, which is a type of transaction in the current account of the balance of payments. This type of transaction involves the transfer of assets or payments between residents of one country and residents of another country without any exchange of goods or services. In this case, Jane's gift is a transfer of assets (i.e. the gift itself) from the U.S. to Italy. Therefore, it will be recorded in the current account of Italy's balance of payments as a credit item, while the U.S. balance of payments will record it as a debit item.

Jane Has Just Sent a Gift That Was Made in the U.S