Question

What is meant by current account?

Hint:

The current account mainly records trade in goods and services, income from abroad, and unilateral transfers between countries.

Answer 1

Step 1: Meaning of Current Account.
The current account is a component of the balance of payments that records all transactions related to the export and import of goods and services between a country and the rest of the world during a specific period.
Step 2: Transactions included in Current Account.
It includes transactions such as export and import of goods (visible trade), export and import of services (invisible trade), income from investments, and unilateral transfers like remittances, gifts, and grants.
Step 3: Importance of Current Account.
The current account helps in understanding the country's international trade position. It shows whether the country has a surplus or deficit in its international economic transactions.
Step 4: Surplus and Deficit.
If the value of exports exceeds imports, the current account shows a surplus. If imports exceed exports, it results in a current account deficit.