1. True or false: If a country is a net debtor to the rest of the world, its international investment service account is in deficit. Explain your answer.

2. Choose a country and analyze its balance of payments for the past 10 years. Good sources of data include official bulletins of the statistical author- ity of a country or its central banks; International Financial Statistics, which is a publication of the IMF (www.imf.org); and Main Economic Indicators, which is a publication of the Organization for Economic Cooperation and Development (www. oecd.org).

a. Examine how trade in goods and services has evolved over time. Is the country becoming more or less competitive in world markets?

b. Consider the relationship between the country's net foreign asset position and its international investment income account.

c. If the country has run a current account deficit, what capital inflows have financed the deficit? If the country has run a current account surplus, how have the capital outflows been invested?