Answer to Question #99830 in Macroeconomics for Tiffany

Question

Each of the following events will result in either an import or export to be recorded in the current account or the capital account of Vidinland, an imaginary small country in eastern Europe. For each one, say whether it will be a current account import, a current account export, a capital account inflow, or a capital account outflow.
A. Boyan, a prominent resident of Vidinland, purchases a brand-new Swedish automobile.
B. Pete, a resident of the U.S., purchases 1,000 cases of fine wine from Vidinland.

Answer 1

a) This is an import. The invoice would show capital inflows in the form of goods and outflows in the form of foreign currency. To purchase a car, Boyan would have to purchase foreign currency and get it out the country.

b) This is an export. The goods would be moved outside the country. The account would show the inflow of capital in the form of dollars that would be exchanged by Pete at the country's bank.