Answer to Question #275219 in Macroeconomics for shaku

Question

Indicate under which item of the current account each of the following transactions is recorded and whether it will increase or decrease the balance on the current account. 

a. Capeson, a Chadilien exporting company, exports fruit to the Middle East. (2 Marks)

b. Jones and Kelly, a Chadilien engineering firm, hires German engineers to help with the construction of new stadiums. (2 Marks)

c. You receive a dividend (a part of the profit) because you own some shares in Amazon which is based in the US. 

Answer 1

a. Capeson, a Chadilien exporting company, exports fruit to the Middle East. (2 Marks)

The transaction is recorded as a credited and will therefore increase the balance of the current account.

b. Jones and Kelly, a Chadilien engineering firm, hires German engineers to help with the construction of new stadiums. (2 Marks)

The transaction is recorded as a debit and the current account balance therfore decreases due to the transaction.

c. You receive a dividend (a part of the profit) because you own some shares in Amazon which is based in the US. 

The receipt of dividend is recorded as credit and the current account balance increases as a result.