U.S. international transactions are recorded in the balance of payments.
a. Identify if each of the following transactions would be recorded as an increase or decrease in the balance of payments current or financial account for the United States.
a. (i) A wealthy entrepreneur purchases a new car directly from British Motor Works.
a. (ii) A U.S. manufacturer purchases recording equipment from Germany.
b. How would an increase in U.S. price level impact the current account? Explain.
c. How would the change in the current account identified in part (b) impact the international value of the dollar? Explain.