(Solved) For the following questions assume the following facts:(1 )Balance of Payments = 0 prior to the tran

For the following questions 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 reserve at the Fed?
A) Fact 3 is a decrease of $150,000, fact 5 is an increase of $150,000, a net effect of 0.
B) Both fact 3 and fact 5 result in decrease of $150,000, a net effect of -$300,000.
C) Fact 2 is a decrease of $150,000, fact 5 is a decrease of $150,000, a net effect of -$300,000.
D) Fact 3 is an increase of $150,000, fact 5 is a decrease of $150,000, a net effect of 0.
E) Both fact 3 and fact 5 result in increases of $150,000, a net effect of +$300,000.

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For the following questions assume the following facts:(1 )Balance of Payments = 0 prior to the tran

International Economics: Theory and Policy

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