Current account.
In plain English
The current account has four parts: goods, services, primary income such as investment earnings and wages, and secondary income such as remittances and foreign aid. It sits inside the wider balance of payments, alongside the capital and financial accounts. A current account deficit means a country is a net borrower from the rest of the world in that period, and a surplus means it is a net lender. Persistent deficits build up foreign claims on domestic assets. The Bureau of Economic Analysis publishes the United States figures quarterly.
01Why it matters
A country running large persistent current account deficits depends on foreign investors continuing to buy its assets, and shifts in that willingness move interest rates and exchange rates.
02The math, step by step
Say goods run a $900 billion deficit, services a $250 billion surplus, primary income a $150 billion surplus, and secondary income a $70 billion deficit. Net that out: minus 900 plus 250 plus 150 minus 70 equals a $570 billion current account deficit.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
It is broader than the trade balance, because it adds investment income and transfers. A country can run a goods deficit and still post a current account surplus if income earned on its foreign investments is large enough.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice