Balance of Payments
As countries trade goods and services, financial capital flows to establish trade balances. Capital either flows out or in, which creates the country's current account balance. The record of these transactions is reflected over a period of time in what is known as the balance of payments. Read this page and focus on how flows of goods and services are closely connected to flows of capital.
Key Concepts and Summary
International flows of goods and services are closely connected to the international flows of financial capital. A current account deficit means that, after taking all the flows of payments from goods, services, and income together, the country is a net borrower from the rest of the world. A current account surplus is the opposite and means the country is a net lender to the rest of the world.