Question

Suppose Country A's Net International Investment Position has an accounting value of $1000 at the end of 2010.The Current Account Balance for the following years is:2011: +$5002012: -$20002013: +$30002014: -$3000What is the accounting value of Country A's Net International Investment Position at the beginning of 2015?

Answer 1

Consider the following explanation

Step-by-step explanation:

The current account is related to changes in a country’s net international investment position. The term Net International Investment Position is used to refer to the difference between the value of foreign assets owned by the country’s residents and the value of the country’s assets owned by foreign residents.

The net international investment position changes when there is deficits or surpluses in the current account, which imply, respectively, net international purchases or sales of assets.

Therefore, ∆NIIP = CA

NIIP2011 = NIIP2010 + CA2011

NIIP2011 =1000+500= $1500

Now, NIIP2012 = NIIP2011 + CA2012

NIIP2012 = 1500+ (-2000)= -$500

Similarly, NIIP2013 = NIIP2012 + CA2013

NIIP2013 = -500+ 3000= $2500

Therefore, NIIP2014 = NIIP2013 + CA2014

NIIP2014 = 2500 +(-3000) = -$500

So, the accounting value of Country A's Net International Investment Position at the beginning of 2015 is -$500.