For the Following Question Assume the Following Facts

question 103

Multiple Choice

For the following question assume the following facts:
(1) Balance of Payments = 0 prior to the transactions.
(2) Person A (who lives in the United States) purchases an airplane from British Airways for $150,000.
(3) Person A pays with a check from his account at First Union Bank in the United States.
(4) British airways, since it will need dollars in 1 month, deposits the check at the Bank of England.
(5) Bank of England deposits the $150,000 at Commonwealth bank, which is located in the United States.
Due to the transactions above, what are the effects on the balance of payments?

• A) -$150,000 due to import of good (current account debit)
• B) +$150,000 due to import of good (current account credit)
• C) -$150,000 due to deposit of Bank of England (capital account debit)
• D) +$150,000 due to deposit of Bank of England (capital account credit)
• E) No effect (150,000 current account debit and 150,000 capital account credit)

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