Question

An American buys a new Volvo, a car built in Sweden. In the U.S. balance of payments, this transaction would cause the balance on the _____ account to _____.

Answer 1

The buying of a Volvo car will make the debit account of Balance of Payment to increase for the USA.

Step-by-step explanation:

The International trade importation debit account of the USA will increase because it is a debit balance since money was spent by the US to purchase the Volvo car.

Therefore, the Balance of Payment (BOP) was favourable for Sweden (gained money) and unfavourable for the USA (spent money). Sweden gained money while the USA lose money. It was a Credit balance for the Swedish economy while it was a Debit balance for the USA.