1 Welcome to Econ 414 International Economics Study Guide Week twelve

2 Asst 6: Given the following information, find Ireland’s (1) merchandise balance, (2) goods and services balance, (3) current account balance, (4) capital account balance and (5) statistical discrepancy. 1.Ireland exports € 50 worth of shoes 2.A German tourist gets a hair cut in Galway ( € 30) 3.Ireland imports € 100 worth of TVs 4.Irish government sends € 10 worth of aid to Afghanistan 5.A Japanese buys € 90 Irish government bond 6.An Irish tourist goes to movies in Germany ( € 15) 7.An Irish buys a € 55 German bond.

3 Key to Asst 6 1.Merchandise Account has two items in it 1.Ireland exports € 50 worth of shoes 2.Ireland imports € 100 worth of TVs ►Merchandise Balance = = -50

4 Key to Asst 6 2. Goods and Services Account includes merchandise account plus 2 additional items 1.A German tourist gets a hair cut in Galway ( € 30) 2.An Irish tourist goes to movies in Germany ( € 15) ►Goods and Services Balance = – 15 = -35

5 Key to Asst 6 3. Current Account includes goods and services plus gifts ►Irish government sends € 10 worth of aid to Afghanistan ►Current Account Balance = = - 45

6 Key to Asst 6 4. Capital Account includes 1.A Japanese buys € 90 Irish government bond 2.An Irish buys a € 55 German bond ►Capital Account Balance = 90-55=35

7 Key to Asst 6 5. We know that Balance of Payments = 0 Current Account Balance + Capital Account Balance +Statistical Discrepancy = Statistical Discrepancy = 0 Statistical Discrepancy= 10

8 Exam 3 Wednesday, November 14 2 PM, in Thomas 223 Covers –Chapters 7, 8, and 11 –Slides/discussions/assts