Question 1. What is meant by the balance of payments? List the components in the current account.

Question 2. Why is a concept of balance of payments important for decision making by business management.

Question 3. Show and briefly explain the equation of the balance of payments equilibrium.

Question 4. Show, by using a diagram, the balance of payments equilibrium from the following data:

U.S. Balance of payments, 2004 (billions of dollars)

A. Balance on current account         -665

B. Balance on capital account           -2

C. Financial account                          580

D. Errors and omissions                    85

E. Official reserve                               3

Question 5. List and describe the key macroeconomic variables interact with the balance of payments.

Question 6. Describe primary mechanisms by which capital may be moved from one country to another.