Macroeconomics homework assignment

1.  Explain the effect that the central bank’s exchange of gold for U.S. dollars should have on Venezuela’s reserves account.

2.   The article mentions that this year the Venezuelan government and its national oil company must repay $6bn in principal and interest. Assume that the Venezuelan government uses the central bank’s U.S. dollar reserves to make those payments to foreign investors.

a.  Explain how the interest payments (say, $2bn) would be recorded in the balance of payments. Indicate which accounts (current account, capital account or financial account) would be affected and the sign of the two entries.

b.  Explain how the principal payments (say, $4bn) would be recorded in the balance of payments. Indicate which accounts (current account, capital account or financial account) would be affected and the sign of the two entries.

 

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