📚 Learning Guide
Current Account and Trade Balance
easy

What does the current account in a country's balance of payments primarily measure?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
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Choose the Best Answer

A

Trade in goods and services

B

Government expenditures

C

Domestic investments

D

Foreign reserves

Understanding the Answer

Let's break down why this is correct

Answer

The current account in a country's balance of payments mainly measures the flow of goods, services, income, and transfers between that country and the rest of the world. It shows how much a country exports compared to how much it imports. For example, if a country sells more cars to other countries than it buys from them, it has a trade surplus, which is a positive part of the current account. Additionally, the current account includes money earned from investments and money sent to other countries, like remittances. Overall, it helps to understand a country's economic health and its relationship with global trade.

Detailed Explanation

The current account tracks how much a country sells and buys with other countries. Other options are incorrect because Some might think the current account measures government spending; People might confuse the current account with domestic investments.

Key Concepts

current account
Topic

Current Account and Trade Balance

Difficulty

easy level question

Cognitive Level

understand

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