The current account is a term used in economics to describe a countrys transactions with the rest of the world over a defined period, such as a year or a quarter. It is one of the two components of a countrys balance of payments, the other being the capital account). The current account measures a nations earnings and spendings abroad and includes the value of exports and imports of both goods and services, international transfers of capital, net primary income or factor income (earnings on foreign investments minus payments made to foreign investors), and net unilateral transfers that have taken place over a given period of time). The current account is called so because goods and services are generally consumed in the current period).
The current account is an important indicator of an economys speed). A positive current account balance indicates that the nation is a net lender to the rest of the world, while a negative current account balance indicates that it is a net borrower from the rest of the world. The current account may be positive (a surplus) or negative (a deficit), and a countrys current account balance, whether positive or negative, will be equal but opposite to its capital account balance.
The current account balance is then the trade balance plus net factor income (such as interest and dividends from foreign investments or workers remittances) plus net transfer payments (such as foreign aid) . The current account balance is measured in million USD and percentage of GDP. The U.S. has a significant deficit in its current account, with a negative $224.8 billion in Q4 2021.
