METUFEASECON 354Spring 2017 Homework I1. Explain how each of the following transactions generates two entries- a credit and a debitin the U.K. balance of payments accounts, and describe how each entry...

METUFEASECON 354Spring 2017 Homework I1. Explain how each of the following transactions generates two entries- a credit and a debitin the U.K. balance of payments accounts, and describe how each entry would be classified.a. The UK Red Cross sends $5000 worth of tents to the survivors of the earthquake inTurkey.b. An American clothing firm sells its factory in Oxford (UK) to a German firm. Payment ismade by a transfer of $ 97000 to the bank account of the US firm in New York.c. The FED transfers $200000 to a bank in UK in exchange for British government bonds.d. The UK citizen holding the German government bonds receives an interest payment of$2000. Payment is transferred to the bank account of UK citizens in Frankfurt.e. A UK importer buys $600000 worth of Sony videos from Japan. $300000 is transferredto Japanese firm’s bank account in Tokyo. The rest will be paid in 6 month’s time.f. A Swedish jean company imports $4000 worth of cotton from UK. Payment is made bytransferring $4000 to the British producer’s bank account in UK.2. For each transaction, show the entries for UK’s balance of payments. Find the balance ongoods and services, current account balance, capital and financial account balance,changes in official reserves, and overall balance for the year assuming that above are allthe international transactions of the year.3. Explain the relationship between the current account deficit and the exchange rate. Byconsidering the foreign exchange market, explain whether it is possible for a country’scurrency to appreciate when the current account deficit in that country grows. Assumethat there is no government intervention to the exchange rate market. Make sure toexplain your case both graphically and verbally.