Current Account Deficit:
- The current account measures the flow of goods, services, and investmentsinto 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).
- There is a deficit in Current Account if the value of the goods and services imported exceeds the value of those exported.
- 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:
- Trade of goods,
- Services, and
- Net earnings on overseas investments and net transfer of payments over a period of time, such as
- A Trade deficit occurs when the cost of a country’s imports exceeds the cost of Its exports.
- The term “trade deficit” refers to the amount of international trade that takes place between countries throughout the world.
- When an international transaction account has a negative balance, it is said to be a trade deficit. These foreign accounts, such as the balance of payments, track all monetary transactions between residents and non-residents.