The current account balance records which types of transactions?

• A. Trade in goods and services and income transfers.
• B. Capital and financial transactions with the rest of the world.
• C. Domestic tax revenues.
• D. Changes in central bank reserves.

Answer: (A)

The current account tracks day-to-day cross-border flows that aren’t related to investing in assets. It includes the value of exports and imports of goods and services (trade in goods and services) and the income that residents earn from abroad or pay to abroad, along with current transfers. In simple terms, it shows how an economy trades goods and services and how money moves in and out through income and transfers that don’t involve buying or selling assets.

Other options describe different parts of the balance of payments: the capital and financial account records cross-border movements of capital and financial assets; domestic tax revenues relate to government fiscal activity; and changes in central bank reserves are tied to monetary policy and reserve assets, not the current account.