The table gives some information about the U.S....

The table gives some information about the U.S. international transactions in 2008. $$ \begin{array}{lr} \text { Item } & \begin{array}{c} \text { Billions of } \\ \text { U.S. dollars } \end{array} \\ \hline \text { Imports of goods and services } & 2,561 \\ \text { Foreign investment } & \\ \quad \text { in the United States } & 955 \\ \text { Exports of goods and services } & 1,853 \\ \text { U.S. investment abroad } & 300 \\ \text { Net interest income } & 121 \\ \text { Net transfers } & -123 \\ \text { Statistical discrepancy } & 66 \end{array} $$ c. Did U.S. official reserves increase or decrease? d. Was the United States a net borrower or a net lender in 2008? Explain your answer.

The table gives some information about the U.S. international transactions in 2008.
$$
\begin{array}{lr}
\text { Item } & \begin{array}{c}
\text { Billions of } \\
\text { U.S. dollars }
\end{array} \\
\hline \text { Imports of goods and services } & 2,561 \\
\text { Foreign investment } & \\
\quad \text { in the United States } & 955 \\
\text { Exports of goods and services } & 1,853 \\
\text { U.S. investment abroad } & 300 \\
\text { Net interest income } & 121 \\
\text { Net transfers } & -123 \\
\text { Statistical discrepancy } & 66
\end{array}
$$
c. Did U.S. official reserves increase or decrease?
d. Was the United States a net borrower or a net lender in 2008? Explain your answer.

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Key Concepts

Balance of Payments

The balance of payments is a comprehensive record of a country's economic transactions with the rest of the world over a specific period. It is divided into accounts, such as the current account and the capital/financial account, which together should balance. Any discrepancy in one account is offset by adjustments in other accounts, including official reserves.

Official Reserves

Official reserves are foreign currency assets held by a country's central bank, used to manage exchange rates, settle international debts, and intervene in the currency market. Changes in these reserves are a tool for balancing external payments, reflecting how a country offsets deficits or surpluses in its balance of payments.

Net Borrower vs. Net Lender

A net borrower is a country that relies on capital inflows from the rest of the world to finance its deficits, whereas a net lender supplies more capital abroad than it absorbs from foreign sources, resulting in a surplus. This concept is key in understanding a country's overall financial position and its reliance on external financing.

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