11 July, 2020
2 Min Read
The current account measures the flow of goods, services, and investments into and out of the country. It represents a country’s foreign transactions and, like the capital account, is a component of a country’s Balance of Payments (BOP).
A nation’s current account maintains a record of the country’s transactions with other nations that includes net income, including interest and dividends, and transfers, like foreign aid.
It comprises of following components -
Current Account Deficit
There is a deficit in Current Account if the value of the goods and services imported exceeds the value of those exported. It is measured as a percentage of GDP, the formulae for calculating CAD is as follows
Current Account = Trade gap + Net current transfers + Net income abroad
Trade gap = Exports – Imports
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