Economics 52404

1
Economics 5/24/04

• OBJECTIVE Examine Balance of Payments
• I. Journal 51 pt. A
• -Read the Businessweek Newsclip on p.480
• -Answer questions (1-2) p.480
• II. Homework Due Friday 5/28/04
• -Read Ch17 sec2 p.472-479
• -Answer questions (3-6) p.479
• Read Ch17 sec3 p.481-485
• -Answer questions (1,3-5) p.485
• III. Journal 51 pt. B
• -notes on BOP

2
Balance of Payments

• The sum of all transactions which take place
  between a nations residents and the residents of
  all foreign nations.
• The Formula for BOP
• Current Account
• Capital Account
• Official Reserves Account
• Balance of Payments
• If BOP is positive, trade surplus exists
• If BOP is negative, trade deficit exists

3
Current Account

• The section of BOP that records a nations exports
  and imports of goods and services, its net
  investment income, and its net transfers.
• Imports are recorded as a negative
• Exports are recorded as a positive

4
Capital Account

• The section of BOP that records a nations
  purchase of foreign assets abroad and the
  purchase of domestic assets by foreign nations.
• Capital inflows are recorded as a positive
• Capital outflows are recorded as a negative

5
Capital Account in a nut shell

• When we buy foreign companies, its an outflow of
  capital.
• When someone outside of the U.S. buys an American
  company its an inflow of capital.

6
Official Reserves

• Foreign currencies owned by the central bank of a
  nation.
• The foreign currency a central bank holds effects
  the value of that nations currency.
• For example If the Central Bank of Canada held
  3 Billion U.S. Dollars on reserve, the value of
  the Canadian Dollar would be effected when the
  U.S. Dollar changes in value

7
Economics 5/25/04

• ½ Day of School
• Hours 4, 5, 6

8
Economics 5/26/04

• OBJECTIVE Examine the workings of international
  trade
• I. Journal 52 pt. A
• -Read Profile in Economics p.471
• -answer question 1 p.471
• II. Journal 52 pt. B
• -Economics U.S.A. (video)

9
Questions on Econ U.S.A.

• 1.) Why did President Nixon go to Communist
  China?
• 2.) Why were the Japanese able to sell cars in
  the U.S.?
• 3.) What effect has international trade had on
  the American steel industry?

10
Economics 5/27/04

• OBJECTIVE Review for Chapter 17 Test
• I. Journal 53 pt. A
• -Read Business Week Newsclip p.532
• -Answer questions (1-2) p.532
• II. Journal 53 pt. B
• -notes on exchange rates
• III. Chapter 17 Review
• NOTICE Chapter 17 Test Tuesday June 1st

11
Rest of the Year
12
Economics 5/28/04

• OBJECTIVE Complete examination of exchange
  rates
• I. Journal 54
• -notes on Econ U.S.A (video)
• II. Chapter 17 Review
• REMINDER Ch17 Test Tuesday June 1st