Current Account: Trade Balance

The trade balance is the difference between the value of exports and imports. It is typically the largest
component of a country's current account, and is often divided into two subcomponents: The
merchandise trade account is the difference between the value of exports and imports of physical
goods. Physical goods make up most of global trade. Often, when politicians talk about trade
imbalances, they are talking specifically about the state of the merchandise trade account. The services
account is the difference between the value of exports and imports of services. In recent decades, trade
in services has increased significantly as technology has made it possible to export services such as
advertising, call centers, and product design across borders. When the trade balance is positive, exports
exceed imports and the economy has a trade surplus. Conversely, when the trade balance is negative,
imports exceed exports and the economy has a trade deficit.

Current Account: Unilateral Current Transfers Unilateral current transfers refer to unrequited receipts
and payments. They are payments made to other countries for which nothing is received in exchange or
payments received from other countries for which nothing is given in exchange. Examples include
foreign aid, economic development grants, subsidies, workers' remittances, and private gifts and
donations.

Current Account: Balance The current account balance is the sum of all current account credits less the
sum of all current account debits. Alternatively, we can say that the current account of the balance of
payments is: Trade Balance + Income + Unilateral Credit Transfers When credits exceed debits, the
economy has a current account surplus When debits exceed credits, and the economy has a current
account deficit