What are the effects on the British balance of payments of the following set of transactions? U.K. Videos imports £24 million of movies from the U.S. firm Twenty-First Century Wolf (TFCW)
The payment is denominated in pounds, is drawn on a British bank, and is deposited in the London branch of a U.S. bank by TFCW because TFCW anticipates purchasing a film studio in the United Kingdom in the near future.
The import of movies is a debit of £24 million on the British balance of payments. The offsetting credit is the increase in foreign ownership of British assets – the increase in the TFCW bank account in London of £24 million.
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