Welcome to Econ 414 International Economics

1. Welcome to Econ 414 International Economics Study Guide Week twelve

2. Asst 6: Given the following information, find Ireland’s (1) merchandise balance, (2) goods and services balance, (3) current account balance, (4) capital account balance and (5) statistical discrepancy. • Ireland exports €50 worth of shoes • A German tourist gets a hair cut in Galway (€30) • Ireland imports €100 worth of TVs • Irish government sends €10 worth of aid to Afghanistan • A Japanese buys €90 Irish government bond • An Irish tourist goes to movies in Germany (€15) • An Irish buys a €55 German bond.

3. Key to Asst 6 • Merchandise Account has two items in it • Ireland exports €50 worth of shoes • Ireland imports €100 worth of TVs • Merchandise Balance = 50-100 = -50

4. Key to Asst 6 2. Goods and Services Account includes merchandise account plus 2 additional items • A German tourist gets a hair cut in Galway (€30) • An Irish tourist goes to movies in Germany (€15) • Goods and Services Balance = -50 + 30 – 15 = -35

5. Key to Asst 6 3. Current Account includes goods and services plus gifts • Irish government sends €10 worth of aid to Afghanistan • Current Account Balance = -35-10 = - 45

6. Key to Asst 6 4. Capital Account includes • A Japanese buys €90 Irish government bond • An Irish buys a €55 German bond • Capital Account Balance = 90-55=35

7. Key to Asst 6 5. We know that Balance of Payments = 0 Current Account Balance + Capital Account Balance +Statistical Discrepancy = 0 -45+35+Statistical Discrepancy = 0 • Statistical Discrepancy= 10

8. Exam 3 • Wednesday, November 14 • 2 PM, in Thomas 223 • Covers • Chapters 7, 8, and 11 • Slides/discussions/assts