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Merchandise trade - International Financial Statistics

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Answer to the question can be found in the attached data sheets which is the balance of payments data from the IMF's International Financial Statistics Yearbook. GDP and population data are given at the bottom of this page. No additional sources need to the consulted in preparing this assignment. You should explain which data items you are using to answer each question.

1. Merchandise trade plays the most important role in which country?

2. Are the countries net importers or net exporters of services?

3. Which economies earn more from their overseas investments than they pay out to foreign owners (investors) from local earnings?

4. Which countries are usually net savers and which are net investors based on an interpretation of the current account?

5. What types of overseas investments does the country your group is working on typically make? Does any other country we are looking at seem to have a similar pattern? Why do you think so?

6. What categories of investments seem to attract foreign interest in your case-study country? Which of the other countries we are looking at seems to be the least similar to yours on this point? Explain your answer?

7. Which countries normally have to draw down reserves to settle their accounts with the rest of the world?

Canada --- GDP = $714 billion; pop. 31.3 million

China --- GDP = $1,266 billion; pop. 1294.4 million

Israel --- GDP = $103.7 billion; pop. 6.3 million

Italy --- GDP = $1,184 billion; pop. 57.4 million

Japan --- GDP = $3,993 billion; pop. 127.5 million

Russia --- GDP = $346.5 billion; pop. 143.8 million

United States --- GDP = $10,383 billion; pop. 288.5 million

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1. Merchandise trade plays the most important role in which country?

US. We look at the Goods exports, Goods imports and Trade balance accounts. The biggest numbers there (absolute values) indicate that the trade plays the most important role.

2. Are the countries net importers or net exporters of services?

Net importers: China, Canada, Italy, Russian Federation
Net exporters: Israel, Japan, USA

To determine this, we look at the Services Credit and Debit fields. If Credit is greater that Debit (absolute value), then the country is a Net exporter, otherwise Net importer.

3. Which ...

Solution Summary

Merchandise trade is exemplified.

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U.S. Goverment Financing/Balance of Payments

Your hometown newspaper needs someone to write an informative article on large scale economic issues. The reporter who spoke with you before thinks of you, welcomes you home, and requests another article. The attached document named BOB is a summary of disaggregated data drawn from information provided on the 2000 U.S. balance of payments which is in the 2002 federal document, Economic Report of the President, available on the web.

In addition to the balance of payments data presented above, the Bureau of Economic Analysis' document entitled, International Investment Position of the United States (http://www.bea.gov/bea/newsrel/intinvnewsrelease.htm) offers the following information.

"At year-end 2002, the value of foreign investments in the United States exceeded the value of U.S. investments abroad by $2,387.2 billion (preliminary) with direct investment valued at current cost. At year-end 2001, foreign investments in the United States exceeded U.S. investments abroad by $1,979.9 billion (revised)."

Write an article on the United States's current account deficit. The reporter will edit your material down to a usable length but asked for plenty of material with which to start. She requests that you answer the following questions:

What has caused the U.S. run a merchandise trade deficit year after year since the early 1980s?
Is the current account a deficit problem? Explain.
Is the trend of the international investment position of the U.S. problematic? Why or why not?
How is the current account related to a country's business cycle?
What is the relationship between a country's net financial inflow and its current account?
How does the U.S make adjustments for the balance of payment issues?

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