Discussion:
Classifying Transactions. Classify each of the following as a transaction reported in a subcomponent of the current account or of the capital and financial accounts of the two countries involved:
a. A U.S. food chain imports wine from Chile.
b. A U.S. resident purchases a euro-denominated bond from a German company.
c. Singaporean parents pay for their daughter to study at a U.S. university.
d. A U.S. university gives a tuition grant to a foreign student from Singapore.
e. A British Company imports Spanish oranges, paying with euro dollars on deposit in London.
f. The Spanish orchard deposits half its proceeds in a euro dollar account in London.
g. A London-based insurance company buys U.S. corporate bonds for its investment portfolio.
h. An American multinational enterprise buys insurance from a London insurance broker.
i. A London insurance firm pays for losses incurred in the United States because of an international terrorist attack.
j. Cathay Pacific Airlines buys jet fuel at Los Angeles International Airport so it can fly the return segment of a flight back to Hong Kong.
k. A California-based mutual fund buys shares of stock on the Tokyo and London stock exchanges.
l. The U.S. army buys food for its troops in South Asia from local venders.
m. A Yale graduate gets a job with the International Committee of the Red Cross in Bosnia and is paid in Swiss francs.
n. The Russian government hires a Norwegian salvage firm to raise a sunken submarine.
o. A Colombian drug cartel smuggles cocaine into the United States, receives a suitcase of cash, and flies back to Colombia with that cash.
p. The U.S. government pays the salary of a foreign service officer working in the U.S. embassy in Beirut.
q. A Norwegian shipping firm pays U.S. dollars to the Egyptian government for passage of a ship through the Suez Canal.
r. A German automobile firm pays the salary of its executive working for a subsidiary in Detroit.
s. An American tourist pays for a hotel in Paris with his American Express card.
t. A French tourist from the provinces pays for a hotel in Paris with his American Express card.
u. A U.S. professor goes abroad for a year on a Fulbright grant.