25 points You are provided with the following information ab

(25 points) You are provided with the following information about a country\'s international transactions during a given year (in millions): Service exports Service imports Merchandise exports Merchandise imports Income flows, net Gifts to foreigners Increase in the country\'s holding of foreign assets, net $346 $354 $480 $348 $153 $142 $352 (excluding official reserves assets) Increase in foreign holdings of the country\'s assets, net $252 (excluding official reserves assets) Statistical discrepancy, net credit $154 Calculate the official settlements balance and the current account balance. Is the country increasing or decreasing its net holdings of official reserve assets? Why?

Solution

Current account balance includes only income flows and gifts to foriegners=153-142=11

Official settlement balance=increase in country holding of foreign assets - increase in foreign holding of country\'s assets=352-252=100

Note exports and imports are parts of trade balance only