ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The current account is the sum of net income from abroad, net current transfers, and the balance of trade. The balance of payments includes the current account and the capital account.

Detailed explanation-2: -Current account measures the nation’s earnings and spendings abroad and it consists of the balance of trade, net primary income or factor income (earnings on foreign investments minus payments made to foreign investors) and net unilateral transfers, that have taken place over a given period of time.

Detailed explanation-3: -The current account balance of payments is a record of a country’s international transactions with the rest of the world. The current account includes all the transactions (other than those in financial items) that involve economic values and occur between resident and non-resident entities.

Detailed explanation-4: -Capital Accounts: An Overview. The current and capital accounts represent two halves of a nation’s balance of payments. The current account represents a country’s net income over a period of time, while the capital account records the net change of assets and liabilities during a particular year.

Detailed explanation-5: -Balance of Trade = Country’s Exports – Country’s Imports. For example, suppose the USA imported $1.8 trillion in 2016 but exported $1.2 trillion to other countries. Then, the USA had a trade balance of-$600 billion, or a $600 billion trade deficit.