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Chapter 23: Q 23 (page 577)

What is included in the current account balance?

Short Answer

Expert verified

Current account balance is one of the three components of balance of payments. There are four major components included in current account balance.

Step by step solution

01

Step 1. Goods 

Imports and exports of goods only. These include objects physical in nature and are movable. It is basically transfer of ownership form domestic country of buyer of outside country.

02

Step 2. Services

Intangible actions such as transportation services, royalties and licensing. money that is received for a service is import and spent on a service is export. When imports exceed exports its trade deficit service and when exports exceeds it is trade surplus service.

03

Step 3. Income

Money that is coming in or out of country in form of salaries, portfolio investments or any type of investment. Income work as a fuel for function of the economy

04

Step 4. Unilateral transfers

transfers also known as current transfers These include workers' remittances , donations, aids and grants , pensions. It is when transfer of money is done from one country to other without receiving good and services of any kind in return.

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Most popular questions from this chapter

Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Is this possible?

Explain the relationship between a current account deficit or surplus and the flow of funds.

Describe a scenario in which a trade surplus benefits an economy and one in which a trade surplus is occurring in an economy that performs poorly. What key factors or factors are making the difference in the outcome that results from a trade surplus?

If domestic investment increases, and there is no change in the amount of private and public savings, what must happen to the size of the trade deficit?

The GDP for the United States is \(18,036 billion and its current account balance is 鈥揬)484 billion. What percent of GDP is the current account balance?
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