For each of the following transactions that may by themselves change the sum of the Canadian current

account​balance, CA, and the Canadian capital account​balance, KA, give an example of an offsetting
transaction that would leave CA
plus
+KA unchanged.
Part 2

a. The Canadian government sells military equipment to a foreign government. An example of an

offsetting transaction​is:
Part 3

A.

Canadian citizens buy cars from the foreign​country, which is a negative entry in the current account.

Your answer is correct.

B.

A foreign bank buys Canadian government​bonds, which is a negative entry in the capital account.

C.

Kuwait pays for the services of a Canadian team of oil fire​fighters, which is a positive entry in the current
account.

D.

No transaction needed.
Part 4

b. A London bank sells yen​to, and buys Canadian dollars​from, a Swiss bank. An example of an
offsetting transaction​is:
Part 5

A.

Kuwait pays for the services of a Canadian team of oil fire​fighters, which is a positive entry in the current
account.

B.

Canadian citizens buy cars from the foreign​country, which is a negative entry in the current account.

C.

A Canadian bank buys U.K. government​bonds, which is a negative entry in the capital account.

D.
No transaction needed.

Your answer is correct.

Part 6

c. The Bank of Canada sells yen​to, and buys dollars​from, a Swiss bank. An example of an offsetting
transaction​is:
Part 7

A.

The Canadian government sells a bankrupt​singer's home to an Egyptian​citizen, which is a positive entry
in the capital account.

B.

The Bank of Canada sells dollars​to, and buys euros​from, the European Central​Bank, which is a
negative entry in the capital account.

Your answer is correct.

C.

Canadian citizens buy cars from the foreign​country, which is a negative entry in the current account.

D.

No transaction needed.
Part 8

d. A Canadian bank receives the interest on its loans to Brazil. An example of an offsetting transaction​is:
Part 9

A.

Brazilian citizens receive interest on Canadian government bonds they​own, which is a negative entry in
the current account.

Your answer is correct.

B.

A Canadian bank buys U.K. government​bonds, which is a negative entry in the capital account.

C.

Kuwait pays for the services of a Canadian team of oil fire​fighters, which is a positive entry in the current
account.
D.

No transaction needed.
Part 10

e. A Canadian collector buys some modern art from a collection in Japan. An example of an offsetting
transaction​is:
Part 11

A.

Kuwait pays for the services of a Canadian team of oil fire​fighters, which is a positive entry in the current
account.

B.

The Canadian government sells a bankrupt​singer's home to an Egyptian​citizen, which is a positive entry
in the capital account.

Your answer is correct.

C.

A Canadian bank buys U.K. government​bonds, which is a negative entry in the capital account.

D.

No transaction needed.
Part 12

f. A Canadian oil company buys insurance from Lloyds of London to insure its oil rigs in the Beaufort Sea.
An example of an offsetting transaction​is:
Part 13

A.

Canadian citizens buy cars from the foreign​country, which is a negative entry in the current account.

B.

Kuwait pays for the services of a Canadian team of oil fire​fighters, which is a positive entry in the current
account.

Your answer is correct.

C.

The Canadian government sells a bankrupt​singer's home to an Egyptian​citizen, which is a positive entry
in the capital account.
D.

No transaction needed.
Part 14

g. A Canadian company borrows from a U.S. bank. An example of an offsetting transaction​is:

Part 15

A.

A Canadian bank buys U.K. government​bonds, which is a negative entry in the capital account.

Your answer is correct.

B.

Canadian citizens buy cars from the foreign​country, which is a negative entry in the current account.

C.

The Canadian government sells a bankrupt​singer's home to an Egyptian​citizen, which is a positive entry
in the capital account.

D.

No transaction needed.

Which of the following types of changes in desired saving and desired investment does NOT lead to a
larger current account deficit in a small open​economy?
Part 2

A.

An increase in taxes to finance government infrastructure investment projects.