International Economy (H.W 4)

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International Economics -HW 4
Chapter 10:
Suppose you are planning a two day trip to a foreign country. Choose a city and explore how much it would cost in foreign currency to stay in a hotel, food, sightseeing, etc. i.e. Prepare a budget. Convert all of the expenses in US dollars?
A visit to United States’ Southern border in Mexico City the capital of Mexico cost approximately 1100 pesos, inclusive of 450 for foods and drinks, 450 for two days stay in a hotel, and 200 pesos for sightseeing, but this will be on weekend which help to save on costs most museums tend to be free on Sundays. Conversion of pesos to American dollars at the rate of 12.3 pesos (MX$ or MN) to one dollar ($) is necessary, with the actual amount spent being approximately 8 $ more than the budgeted costs.
Budget
Budgeted Amount MX $budgeted $Actual Amount MX$actual $Difference $40032.5245036.58-4.0650040.6545036.584.0730024.3920016.268.13120097.56110089.438.13
What does the balance of international indebtedness measure? How is it different from Balance of Payments?
The balance of international indebtedness measures the level of debt in a country through the assets and liabilities held against other countries. This measure indicates whether a country is a net creditor or debtor. In essence, this parameter shows the level of economic activities on a yearly basis or a quarter through investment levels (Carbaugh 364). This measure is relevant as it has various categories of investment holdings which then facilitate policy formulation by focusing on the liquidity status of a country from the measure.
On the other hand, the Balance of Payment (BOP) shows the payments of a country with that of her trading partners in a given year. Thus, BOP occurs when there are international transactions through activities of residents in that country. Every transaction constitutes a debit and credit entry through double entry book keeping, in contrast to the balance of international indebtedness which records transactions as either a debit or credit. The balance of payments could be favorable (positive/ surplus) indicating that there are more inflows than outflows in the country while an unfavorable (negative/ deficit) balance of payment indicates that there is more outflows form international trade than there are inflows.
Question 9
Indicate whether each of the following items represent a debit or credit on the US balance of payments.
A U.S. importer purchases a shipload of French wine. Debit
A Japanese automobile firm builds an assembly plant in Kentucky. Credit
A British manufacturer exports machinery to Taiwan on a U.S. vessel. Credit
A U.S. college student spends a year studying in Switzerland. Debit
American charities donate food to people in drought-plagued Africa. Debit
Japanese investors collect interest income on their holdings of U.S. government securities. Debit
A German resident sends money to her relatives in the United States. Credit
Lloyds of London sells an insurance policy to a U.S. business firm. Debit
A Swiss resident receives dividends on her IBM stock. Debit
In essence , credit transactions in the balance of payments constitute inflows to a country through actions of foreigners, while debit transactions relates to outflows through payments to foreigners.
Question 11
A country is a net creditor when the value of assets held abroad is higher than the value of foreign owned assets in that country while the converse is also true (Carbaugh 364). Thus, the US is a net debtor as foreign assets in US exceed those held abroad by $ 25 billion.
Type of investmentAmount ($ Billion)US government assets abroad $150 US private assets abroad 75Total$225 Foreign official assets in the United States $25 Other foreign assets in the United Sates 225Total$250 Net international investment position$25 
Chapter 11
Question 1
What is meant by the foreign- exchange market? Where is it located
The foreign exchange market involves the global trading in international currencies especially thro...