Question

QUESTION 1: a) Briefly explain and show in the table below how each of the following transactions would be entered in the Spanish balance of payments. Note that all the amounts in the Spanish balance of payments are recorded in euros. I) Tourists from Germany spend 3,000,000 euros on vacation in Spain. They pay with checks on their banks in Germany. II) Zara US Inc. (a Spanish company operating the US) pays a dividend of US$2,000,000 to its shareholders in Spain. Zara US Inc. converts the US$ for euros at the central bank of Spain (assume that the dollar/euro exchange rate is US$2/€). III) Beyonce (a US singer) is paid 600,000 euros for a concert in Madrid (Spain). Beyonce wants to hold US$ instead of euros, so she exchanges 600,000 euros for US$ at the central bank of Spain (assume that the dollar/euro exchange rate is US$2/€). Spanish Balance of Payments (in euros) CREDIT (+) DEBIT (-) Current Account Capital Account Financial Account

Answer 1

Balance Of Payment (BOP) is a statement which records all the monetary transactions made between residents of a country and the rest of the world during any given period.

There are three Elements of Balance of Payment

- Current Account (It includes trading of goods or Services)

- Capital Account (It includes Asset)

- Financial Account (Investment & Intangibles)

Spanish Balance of Payments (in euros)
Current Account	Credit (+)	Debit (-)	Total
I Services Revenue	3,000,000		3,000,000
III Dividends Payments	1,000,000	1,000,000	0
Capital Account
Financial Account
Total	4,000,000	1,000,000	3,000,000

Concernt Payment is not the Balance of Payment transaction