Use the T-account to show how the following items appear in the current account or the capital account

Economics Dec 03, 2020

Use the T-account to show how the following items appear in the current account or the capital account. a. A Japanese tourist spends $6000 during her vocation in Hawaii. b. An American importer buys $15 million worth of Japanese TVs. c. Honda company sets up a factory in Alabama worth $2 billion. d. A U.S. investor buys a $500 Sony bond.

Expert Solution

a. japanese tourist spending will be recorded in Credit side of current account

b. import of goods from Japan is recorded in Debit side of current account

c. Honda setting up factory in alabama is FDI inflow in US and is recorded in Credit side of capital account

d. US investor purchasing sony bond is FPI outflow and is recorded in Debit side of capital account.

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