Mr. Frank is a citizen of Gatorland. He wants a better return on his savings than he gets in Gatorland, so he buys newly issued government bonds from the nation of Hamsterville.

How is this purchase counted in the balance of payments in each country?
Choose 1 answer:
(A) No impact on Gatorland's balance of payments; a credit in Hamsterville's current account.
(B) A debit in Gatorland's current account; a credit in Hamsterville's current account.
(c) A debit in Gatorland's financial account; a credit in Hamsterville's financial account.
(D) A credit in Gatorland 's financial account; a debit in Hamsterville's financial account.

Question

Mr. Frank is a citizen of Gatorland. He wants a better return on his savings than he gets in Gatorland, so he buys newly issued government bonds from the nation of Hamsterville.

How is this purchase counted in the balance of payments in each country?
Choose 1 answer:
(A) No impact on Gatorland's balance of payments; a credit in Hamsterville's current account.
(B) A debit in Gatorland's current account; a credit in Hamsterville's current account.
(c) A debit in Gatorland's financial account; a credit in Hamsterville's financial account.
(D) A credit in Gatorland 's financial account; a debit in Hamsterville's financial account.

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Financial Account: The financial account in the balance of payments records transactions that involve the transfer of ownership of financial assets between countries. ‖ ‖ b ⋮ Transaction Analysis: When Mr. Frank, a citizen of Gatorland, buys newly issued government bonds from Hamsterville, he is transferring financial capital from Gatorland to Hamsterville. ‖ ‖ c ⋮ Impact on Gatorland: This transaction results in a debit in Gatorland's financial account because money is flowing out of Gatorland to purchase the bonds. ‖ ‖ d ⋮ Impact on Hamsterville: Conversely, Hamsterville will record a credit in its financial account because it is receiving financial capital from Gatorland. ‖ ∻Answer∻ ⚹ (C) A debit in Gatorland's financial account; a credit in Hamsterville's financial account. ⚹ ∻Key Concept∻ ⚹ Financial Account in Balance of Payments ⚹ ∻Explanation∻ ⚹ The purchase of newly issued government bonds by a foreign citizen is recorded in the financial account of both countries involved. The country whose citizen is buying the bonds will record a debit, while the country issuing the bonds will record a credit.◊How does purchasing newly issued government bonds from another country impact the balance of payments in both countries⍭ Generate me a similar question◊⚹

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