INDIVIDUAL ASSIGNMENT FOR THE COURSE INTERNATIONAL ECONOMICS The balance of payments of a hypothetical country & In billions Birr 1) Exports of goods & +300 2) Imports of goods & -400 3) Exports of services & +240 4) Imports of services & -320 5) Interest, profits and dividends received & +40 6) Interest, profits and dividends paid & -20 7) Unilateral receipts & +60 8) Unilateral payments & -20 9) Investment Abroad & -90 10) Short-term lending & -130 11) Medium- and long-term lending & -150 12) Repayment of borrowing from rest of the world & -105 13) Inward Foreign investment & +340 14) Short-term borrowing & +40 15) Medium- and long-term borrowing & +60 16) Repayments on loans received from rest of the world & +100 I, Calculate: A) Current Account B) Trade Balance C) Invisible Balance D) Current account balance E) Capital Account F) Capital account balance G) Statistical error H) Official settlements balance I) Official financing balance J) Overall balance of payments K) Change in reserves rise L) IMF borrowing from II. Explain the difference between current and capital account III. Explain the difference between Absolute and Relative purchasing power parity

## Step 1: Calculate the Current Account### The current account includes the trade balance, invisible balance (services), and unilateral transfers. It is calculated as follows:- **Trade Balance**: Exports of goods - Imports of goods = billion Birr.- **Invisible Balance**: Exports of services - Imports of services + Interest, profits, and dividends received - Interest, profits, and dividends paid = billion Birr.- **Unilateral Transfers**: Unilateral receipts - Unilateral payments = billion Birr.The **Current Account Balance** is the sum of the Trade Balance, Invisible Balance, and Unilateral Transfers: ## Step 2: Calculate the Capital Account### The capital account includes short-term and long-term capital movements. It is calculated as follows:- **Short-term Lending and Borrowing**: Short-term borrowing - Short-term lending = billion Birr.- **Medium- and Long-term Lending and Borrowing**: Medium- and long-term borrowing - Medium- and long-term lending = billion Birr.- **Inward Foreign Investment**: billion Birr.- **Repayments on loans received from rest of the world**: billion Birr.The **Capital Account Balance** is the sum of these components: ## Step 3: Calculate Statistical Error### Statistical error is not directly given in the table but can be inferred if needed to balance the accounts.## Step 4: Calculate Official Settlements Balance### This includes changes in reserves and IMF borrowing. Since specific values are not provided, this step requires additional data or assumptions.## Step 5: Calculate Overall Balance of Payments### The overall balance of payments is the sum of the current account balance and the capital account balance: ## Step 6: Explain the Difference between Current and Capital Account### The current account records transactions related to goods, services, income, and current transfers, reflecting a country's net income over a period. The capital account records financial transactions that affect national ownership of assets, including investments and loans.## Step 7: Explain the Difference between Absolute and Relative Purchasing Power Parity### Absolute purchasing power parity suggests that identical goods should have the same price when expressed in a common currency. Relative purchasing power parity considers inflation rates, suggesting that exchange rates will adjust to offset differences in inflation between countries.