Balance of Payment Transaction and Challenges of Global Expansion
The BoP (Balance of Payments) refers to all transactions across a country border. Under the balance of payments transactions, all the payments coming into the country is denoted as a plus sign while the transactions going out of the country is a denoted as a minus sign. When an Australian consumer imports American goods, the transaction enters the American balance of payments as credit or positive sign into the U.S. current account. On the other hand, when Americans import goods and services from another country, the transactions enter the U.S. BoP as a debit or negative sign. (Chan, 2012).
Objective of this paper is explore the concept of the U.S. balance of payments.
U.S. resident purchases a German Mercedes Benz
When an American resident purchases a German Mercedes Benz C230, the transaction is a debit under the CA (Current Account). The current account tracks the good and services flow in and out of the United States. The Mercedes Benz C230 is a German car and when an American resident purchases this car, the transaction will be recorded in the debit under the current account. When U.S. resident purchases foreign goods and services, the transaction increases a capital outflow as being revealed in the table below:
U.S. Current Account
Credit
Debit
An American resident purchases a Mercedes Benz C230
-$35,000
2. U.S. Resident Purchases an American Chevelot Impala
When an American resident purchases the Chevelot Impala, there is no entry to the American BOP statement because the Chevelot Impala is an American car, and the transaction is domestic and no international transaction involves.
3. Foreigner...
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