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By the end of this section, you will be able to:

  • Explain merchandise trade balance, current account balance, and unilateral transfers
  • Identify components of the U.S. current account balance
  • Calculate the merchandise trade balance and current account balance using import and export data for a country

A few decades ago, it was common to track the solid or physical items that were transported by planes, trains, and trucks between countries as a way of measuring the balance of trade. This measurement is called the merchandise trade balance    . In most high-income economies, including the United States, 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, powered by technological advances in telecommunications and computers that have made it possible to export or import customer services, finance, law, advertising, management consulting, software, construction engineering, and product design. Most global trade still takes the form of goods rather than services, and the merchandise trade balance is still announced by the government and reported prominently in the newspapers. Old habits are hard to break. Economists, however, typically rely on broader measures such as the balance of trade or the current account balance    which includes other international flows of income and foreign aid.

Components of the u.s. current account balance

[link] breaks down the four main components of the U.S. current account balance for the last quarter of 2014 (seasonally adjusted). The first line shows the merchandise trade balance; that is, exports and imports of goods. Because imports exceed exports, the trade balance in the final column is negative, showing a merchandise trade deficit. How this trade information is collected is explained in the following Clear It Up feature.

Components of the u.s. current account balance for 2014 (in billions)
Value of Exports (money flowing into the United States) Value of Imports (money flowing out of the United States) Balance
Goods $410.0 $595.5 –$185.3
Services $180.4 $122.3 $58.1
Income receipts and payments $203.0 $152.4 $50.6
Unilateral transfers $27.3 $64.4 –$37.1
Current account balance $820.7 $934.4 –$113.7

How does the u.s. government collect trade statistics?

Do not confuse the balance of trade (which tracks imports and exports), with the current account balance, which includes not just exports    and imports    , but also income from investment and transfers.

Statistics on the balance of trade are compiled by the Bureau of Economic Analysis (BEA) within the U.S. Department of Commerce , using a variety of different sources. Importers and exporters of merchandise must file monthly documents with the Census Bureau, which provides the basic data for tracking trade. To measure international trade in services—which can happen over a telephone line or computer network without any physical goods being shipped—the BEA carries out a set of surveys. Another set of BEA surveys track investment flows, and there are even specific surveys to collect travel information from U.S. residents visiting Canada and Mexico. For measuring unilateral transfers, the BEA has access to official U.S. government spending on aid, and then also carries out a survey of charitable organizations that make foreign donations.

This information on international flows of goods and capital is then cross-checked against other available data. For example, the Census Bureau also collects data from the shipping industry, which can be used to check the data on trade in goods. All companies involved in international flows of capital—including banks and companies making financial investments like stocks—must file reports, which are ultimately compiled by the U.S. Department of the Treasury. Information on foreign trade can also be cross-checked by looking at data collected by other countries on their foreign trade with the United States, and also at the data collected by various international organizations. Take these data sources, stir carefully, and you have the U.S. balance of trade statistics. Much of the statistics cited in this chapter come from these sources.

Questions & Answers

i don't understand it
Asare Reply
in one page explain the concept of market failure
Preshus Reply
where goverment fail to suppy need of poeple because there scarcity resorces .that lead Market to failure
LUMCADORH
what is Principle Economics
Hafiz Reply
outline price and production levels
Amokelane Reply
the disadvantage of monopolistic competition
Balam Reply
what is economics
Amara Reply
Economics is a social science which studies human behavior between ends and scarce means which has alternate uses
Evangelist
what is demand
Jattu Reply
what is windfall gain?
Bakshi
Demand may be defined as the amount of quantity of good and service which a consumer is willing to buy and with the ability to pay at a given price and ya a particular time
Afagami
What is captalizeg
Saminu Reply
What is socializing
Saminu
What is socializing
Saminu
What is socializing
Saminu
what is demand
Oforiwaa Reply
demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time.
Modest
what is opportunity cost
Aboubakar Reply
what is gini coefficient?
Khalipha Reply
Never heard of that!!!!
Abdulrahmon
ive heard about it Actually i know it..
Shamamet
In that case, you have to help us.
Patrick
Another name for Absolute cost advantage
fatimah Reply
what is the difference between demand and supply
Peter Reply
what is the national income
Kamara Reply
oils and resources
Peter
it is the sum of all incomes earned by factors of production usually a year
C-Stixxs
What's current account?
Che Reply
Demand refers to goods and services that the buyer is willing and able to buy at a price over a period of time
Che

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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