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ECON 310

Phase 4 IP Assignment

1.      Define the balance of payments.

2.      Why is it important to examine a country’s balance of payments data?

3.      There are three main category accounts in the U.S. balance of payments: the current account, the capital account, and the statistical discrepancy account. Briefly define these three parts of the BOP.

4.      What is meant by double-entry bookkeeping?

5.      Using the following source: http://www.census.gov/foreign-trade/statistics/historical/gands.pdf, fill in the table below:

6.      Has the current account deficit been increasing or shrinking since 2000? What do you think has been causing this pattern since 2000?

7.      How has the U.S. been able to run current account deficits like what you show in your table above for this time period?

8.      In fact, if you look carefully at the source above, you will notice that the United States has experienced continuous current account deficits since the early 1980s. What do you think are the main causes for the deficits?

9.      In contrast to the U.S., Japan has realized continuous current account surpluses. What could be the main causes for these surpluses?

10.  Is it desirable to have continuous current account surpluses? Why or why not?

11.  Comment on the following statement: “Since the U.S. imports more than it exports, it is necessary for the U.S. to import capital from foreign countries to finance its current account deficits.”

12.  What are the benefits and risks of the United States becoming a net debtor nation?