Current account

Current account and the balance of payments

AD shifts red and gdp increases and price increases

The BOP records all money flowing into a country net of money flowing out of a country.

We concentrate on the current account in the L6 and, actually, it is still the most important BOP component in the US6.

Trade in goods and services make up the first section of the current account.

Trade in goods measures the value of imports and exports of visible goods. E.G Cars

Trade in services measures the value of the imports and exports of services e.g. banking services.

Trade deficit more imports than exports

Trade surplus more exports than imports.

Current account is trade in goods+ trade in services + primary income + secondary income

Primary income is the net income earned from past investments from abroad (interests, profits, and dividends) plus repatriated incomes earned working abroad.