Question 20.7

1. 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. So 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. So this is identical to the answer to part b: the sale of the jet enters the financial account.