Which account measures trade in goods and services?

Which account measures trade in goods and services?

• A. Current account
• B. Capital account
• C. Financial account
• D. Trade balance

Answer: (A)

Trade in goods and services is a current transaction between residents and non-residents, so it sits in the current account of the balance of payments. This account captures the flow of exports and imports of goods and services, plus income from abroad and current transfers. The net result for goods and services—often called the trade balance—is a component of this current account, not the account itself. The capital account handles capital transfers and non-produced asset transactions, while the financial account tracks changes in financial assets and liabilities across borders. So the measure of trade in goods and services is found in the current account.

Trade in goods and services is a current transaction between residents and non-residents, so it sits in the current account of the balance of payments. This account captures the flow of exports and imports of goods and services, plus income from abroad and current transfers. The net result for goods and services—often called the trade balance—is a component of this current account, not the account itself. The capital account handles capital transfers and non-produced asset transactions, while the financial account tracks changes in financial assets and liabilities across borders. So the measure of trade in goods and services is found in the current account.