The Balance of Payments

The balance of payments is a record of all economic transactions between the residents of a country and the rest of the world over a period of time, usually a year. It is divided into three main accounts: the current account, the capital account, and the financial account. By construction, the balance of payments as a whole always balances; a deficit in one part is offset by a surplus in another.

The current account

The current account records the flow of income into and out of a country. It has four components: - Balance of trade in goods: exports minus imports of physical goods (also called visible trade). - Balance of trade in services: exports minus imports of services such as tourism, banking, and shipping (invisible trade). - Primary income (net income): earnings on investments and l