1. What are the effects on the French balance of payments of the following set of transactions? Les Fleurs de France, the French subsidiary of a British company, The Flowers of Britain, has just received :4.4 million of additional investment from its British parent. Part of the investment is a :0.9 million computer system that was shipped from Britain directly. The :3.5 million remainder was financed by the parent by issuing euro-denominated Eurobonds to investors outside of France. Les Fleurs de France is holding these euros in its Paris bank account.

2. In December 1994, a major earthquake rocked Kobe, Japan, destroying the housing stock of more than 300,000 people and ruining bridges, highways, and railroad tracks. What impact, if any, do you think this event had on the Japanese current account deficit? Why?