Question

The balance of payments (bop) measures all international transactions between two countries. the chart below shows six different transactions between the us and china united states china • purchased $800 of goods and services • sent $100 of humanitarian aid • americans spent $200 in chinese stock market • american tourists spend $1000 in china • chinese tourists spend $1000 in the us • purchased $300 of goods and services • chinese purchased a $600 business in the us • chinese government purchased us. bonds


a. which country has a trade deficit and which has a trade surplus

Answer 1

Answer:

Answer: US had a trade deficit and China had a surplus in its BOP

Explanation:

Inflow to US economy / Outflow of Chinese economy

1. Chinese tourist spent                  $ 1000

2. Chinese purchased a business    $600

3. Puchased goods                          $300

Total Inflow                                    $1900

US Outflow / China' inflow

US purchases goods                         $800

Sent aid                                             $100

Investment in stocks                         $200

US tourist spent                                $1000

Total Outflow                                   $2100

US had a trade deficit and China had a surplus in its BOP

Chinese government purchase of US bonds' value is not given, the purchase will be treated as credit to US BOP and the income received will be credit to China's BOP.

Answer 2

The country that has a trade deficit  is US and the country that has a trade surplus is China.

A country has a trade surplus if the value of export is greater than the value of import.

A country has a trade deficit if the value of export is less than the value of import.

If the US buys goods from China, it is considered import to US and export to China

Total value of export in China / Total value of import to US:

Cost of goods and services purchased + humanitarian aid + amount spent by tourists + amount spent in the stock market

$800 + $100 + $200 + $1000 = $2100

Total value of export in US / Total value of import to China:

Cost of goods and services purchased + humanitarian aid + amount spent by tourists  

$1000 + $300 + $600 = $1900

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