2. Looking at credits and debits The following table shows the value of credits and debits in four balance-of-payments accounts in the fictional economy of Gamros. | Balance-of-Payments Account | Debits (Billions of dollars) | Credits (Billions of dollars) | |---|---|---| | Merchandise | 40 | 70 | | Services | 20 | 20 | | Income Receipts | 35 | 20 | | Unilateral Transfers | 25 | 30 | | Total | 120 | 140 | Based on the total values of Gamros's debits and credits, there is less money flowing out of Gamros to foreign countries than there is flowing into Gamros. This means that Gamros has a deficit in the current account. Complete the following table based on the credits and debits presented in the previous table. | Term | How to Calculate | Deficit or Surplus | Size of Deficit or Surplus (Billions of dollars) | |---|---|---|---| | Current Account Balance | | | | | Balance of Trade | | | |
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Debits represent money flowing out, and credits represent money flowing in. The total debits are 120 billion dollars, and the total credits are 140 billion dollars. Since credits (140) are greater than debits (120), there is less money flowing out than flowing in. Show more…
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