Check Your Understanding

  1. Question

    Which of the balance of payments accounts do the following events affect?

    1. Boeing, a U.S.-based company, sells a newly built airplane to China.

      The sale of the new airplane to China represents an export of a good to China and so enters the current account.
    2. Chinese investors buy stock in Boeing from Americans.

      The sale of Boeing stock to Chinese investors is a sale of a U.S. asset and so enters the financial account.
    3. A Chinese company buys a used airplane from American Airlines and ships it to China.

      Even though the plane already exists, when it is shipped to China, it is an export of a good from the United States. Thus, the sale of the plane enters the current account.
    4. A Chinese investor who owns property in the United States buys a corporate jet, which he will keep in the United States so he can travel around America.

      Because the plane stays in the United States, the Chinese investor is buying a U.S. asset. The sale of the jet enters the financial account.
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