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Balance of payments

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Explain how each of the following transactions generates two entries--a credit and a debit--in the American balance of payment accounts, and describe how each entry would be classified:

a. An American buys a share of German stock and is paying by writing a check on an account with a Swiss bank.

b. An American buys a share of German stock and is paying the seller with a check on an American bank.

c. The French government carries out an official foreign exchange intervention in which it uses dollars held in an American bank to buy French currency from its citizens.

d. A tourist from Detroit buys a meal at an expensive restaurant in Lyons, France, paying with a traveler's check.

e. A California winegrower contributes a case of cabernet sauvignon for a London wine tasting.

f. A U.S. owned factory in Britain uses local earnings to buy additional machinery.

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The solution does a good job of answering the debit/credit question related to balance of payments. Some explanation is also provided in the response. However, if a student is looking for a detailed explanation, then this is not the right response to download. Overall, an average response with a concise and clear explanation.

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a) There is a zero balance involved in this transaction because no money flows in or out of the US. (Capital account - private)

b) Buying foreign stock ...

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