Answer to Question #188292 in Macroeconomics for Noluthando

Question

Which one of the following statements regarding the current account is correct?

[1] It records a country’s net trade in goods and services.

[2] It represents a country’s exported and imported goods only.

[3] It can never be negative as transactions with the rest of the world takes place daily.

[4] It indicates a surplus when goods and services imported are greater than goods and services exported.

Answer 1

Solution:

The correct statement is 1.). It records a country’s net trade in goods and services.

 

The current account records a country’s transactions with the rest of the world, especially its net trade in goods and services, its net transfer payments, and its net earnings on cross-border investments over a specific period of time.