Economics » International Trade and Capital Flows » Measuring Trade Balances

Key Concepts and Summary

Key Concepts and Summary

The trade balance measures the gap between a country’s exports and its imports. In most high-income economies, goods make up less than half of a country’s total production, while services compose more than half. The last two decades have seen a surge in international trade in services; however, most global trade still takes the form of goods rather than services. The current account balance includes the trade in goods, services, and money flowing into and out of a country from investments and unilateral transfers.

Glossary

balance of trade (trade balance)

the gap, if any, between a nation’s exports and imports

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

merchandise trade balance

the balance of trade looking only at goods

unilateral transfers

“one-way payments” made by governments, private entities, or individuals that are sent abroad with nothing received in return


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