IBM 200 Summer 2022 Prepared by Dr. Eduardo M. V.

Jasson

IBM 200 Summer 2022

Case # 2
International Trade Economics
Rules
You must write your case report case following the following rules:
Letter Arial 12, paragraph 1.5, You need to answer each of the
questions presented in this case and provide examples if it is
pertinent. Margins must be 1 .5 cm per side. You must use
professional writing etiquette and edit your work before submitting
it.
Submission can be done in PDF or Word Format, using the google
classroom site for this course and your respective section. The due
date is the day indicated as the due date for this assignment.
Penalties for late submission apply and any suspicion of cheating
will be penalized severely, then don’t tempt the luck and do your
work with your own words.
You must use the Cover page at the end of this assignment, and
late submission applies to this assignment.
IBM 200 Summer 2022 Prepared by Dr. Eduardo M. V. Jasson

IBM 200 Summer 2022

Case # 2
International Trade Economics
 By

Date:4-8-2022

Student Name: Harjot singh

Student #: 0795006

IBM 200 Summer 2022 Prepared by Dr. Eduardo M. V. Jasson

Questions

1 Question - For the past year, a country has $200 million in exports of
goods and services. $169million of imports of goods and services. $60
million of income was received from foreigners and -$40 million net
unilateral transfers. What is the range of values for income paid to
foreigners, so that each of the following would be true?
Answer- Current account = exports - imports + revenue received - income
paid - net unilateral transfers

A indicates that the country has a current account surplus.

Current account = $200 -$160 + $60 - income paid -$40

Current account = $60 - earned money

The income must range between $0 and $60 million.

B - the country's goods and services balance is negative.

Without an upper restriction, the income paid would have to be higher

than $60.

C - The country is a net borrower from the rest of the globe.

2 – “A country is better off running a current account surplus rather

than a current account deficit” do you agree or disagree? Explain?
Why?

Answer- I believe this statement since the current account comprises

 revenue from investments, unilateral transfers to and from other
nations, and exports and imports of commodities and services. A
current account surplus would be indicated by a positive net factor for
each of the previously described components—net exports, net
transfers, and net investment income. A positive net factor indicates
that the country is growing and that the available commerce is to its
favour. The national income is rising. Each of them has a multiplier
effect that favours economic progress.

3 - On December 31st, a country has the following stocks of

international assets and liabilities to foreigners:

1. The country’s residents own $30 billion of bonds issued by foreign

governments
2. The country’s central bank holds $20 billion of gold and 15 billion
of foreign currency assets as official reserve assets
3. Foreign firms have invested in production facilities in the country,
with the value of their investments currently $40 billion

4. Residents of foreign countries own 25 billion of bonds issued by

the country’s companies

A – What is the value of the Country’s international investment position? It

is a creditor or a debtor?

Answer- Value of country's international investment position = Value of

External Financial Assets- value of External Financial Liabilities = 45
 billion- 65 billion = -20 billion.

A country's negative foreign investment status suggests that it is a debtor

abroad.

B – If the country the next year runs a surplus in its current account,
what will the impact be on the value of the country’s international
investment position.

Answer- If a country runs a current account surplus during the course

of the next year, the country's foreign investment position will turn
positive and it will become an international creditor.