The current account balance includes the trade in goods, services, and money flowing into and out of a country from investments and unilateral transfers The trade balance measures the gap between a country’s exports and its imports.

In most high-income economies, goods comprise less than half of a country’s total production, while services comprise more than half. As we will see below, a trade deficit necessarily means a net inflow of financial capital from abroad, while a trade surplus necessarily means a net outflow of financial capital from an economy to other countries

current account balance — a broad measure of the balance of trade that includes trade in goods and services, as well as international flows of income and foreign aid. unilateral transfers — “one-way payments” that governments, private entities, or individuals make that they sent abroad with nothing received in return. financial capital — the international flows of money that facilitates trade and investment. country — a net borrower from the rest of the world.