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Chapter 10: Q. 23 (page 266)

What is included in the current account balance?

Short Answer

Expert verified

Exports and imports of goods and services, Income from abroad and unilateral transfers.

Step by step solution

01

Step1. Introduction

In the Balance of Payments for a country, there are primarily 2 accounts-

Current Account, and

Capital Account

02

Step2. Explanation

The current account includes the following components:

Balance of Trade of goods primarily, and also services. If the exports exceed imports, it is surplus, otherwise deficit.

Net income earn from abroad: It includes all the monetary transfer of dividends and capital gains over the money invested in the foreign markets, and also the payment of the same to the foreigners who invested in the Indian market.

Unilateral transfers, as the name suggests, refers to one way flow of money. It can be in the form of gifts, remittances, donations, etc. It accounts for one of the largest part of Current Account.

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Most popular questions from this chapter

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 factor or factors are making the difference in the outcome that results from a trade surplus?

Is it better for your country to be an international

lender or borrower?

What three factors will determine whether a nation has a higher or lower share of trade relative to its GDP?

Will nations that are more involved in foreign

trade tends to have higher trade imbalances, lower trade imbalances, or is the pattern unpredictable?

If foreign investors buy more U.S. stocks and bonds, how would that show up in the current account balance?
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