The correct answer is: A. Current account
The current account is a part of the balance of payments that records all international transactions involving the exchange of goods and services, income, and current transfers. It is a broad measure of a country’s international economic performance.
The current account is divided into three main components:
- Trade in goods records the value of goods that a country exports and imports.
- Trade in services records the value of services that a country exports and imports.
- Income records the income that a country’s residents earn from abroad and the income that foreigners earn in the country.
- Current transfers record unilateral payments, such as gifts and remittances, between residents and non-residents.
A country’s current account balance is the difference between its total receipts and payments on current account. A surplus in the current account means that the country is earning more from its international transactions than it is spending. A deficit in the current account means that the country is spending more on its international transactions than it is earning.
The current account balance is an important indicator of a country’s economic health. A sustained current account deficit can lead to a build-up of foreign debt, which can make a country vulnerable to financial crises.
- Balance of trade is the difference between the value of a country’s exports and imports of goods. A positive balance of trade is called a trade surplus, while a negative balance of trade is called a trade deficit.
- Capital account is a part of the balance of payments that records all international transactions involving the exchange of financial assets, such as stocks, bonds, and real estate.
- Balance of payments is a statement of all international transactions between a country and the rest of the world during a specific period of time, usually one year. It is divided into two main accounts: the current account and the capital account.