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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

what is economic
Charles Reply
what are the type of economic
macroeconomics,microeconomics,positive economics and negative economics
what are the factors of production
process of production
Basically factors of production are four (4) namely: 1. Entrepreneur 2. Capital 3. Labour and; 4. Land but there has been a new argument to include an addition one to the the numbers to 5 which is "Technology"
what is land as a factor of production
what is Economic
economics is how individuals bussiness and governments make the best decisions to get what they want and how these choices interact in the market
how will a country's population be equal to it's labour force
Hope Reply
what is the meaning of ppf
Obeng Reply
What is Economic
Governor Reply
Economics is the social science that deals with the unlimited human wants in the face of scarce (limited in supply) resources.
what is market
Gift Reply
marker is the interaction of buying and selling
market refers to the interaction of the processes of buying and selling of commodities between the buyer and the seller.
market is a place where two parties gather to facilitate exchange of goods and services.
what are some good sources of information to find trends in various Industries
how do on know that marketing is going on
what is consumption
Using revenue
What is stock market
What are the marmet function
Odirile Reply
price elasticity of demand is the degree of responsiveness of a quantity demanded to the change in price of the commodity in question.
Gladys Reply
What does elasticity mean
Elasticity means change in demand with the change in price. It is elastic if the demand changes with the price change whereas it is inelastic if the demand is not affected due to change in price
I have a question
what is the importance of learning economics?
Thelma Reply
it helps to make the correct choice
it helps firm to produce products that will bring more profit
the difference between needs and wants
londiwe Reply
needs are things that we basically can't live without wants are just luxury things
needs are things without them we can't live but want are things without we can live
what is education
it's a process in which we give or receiving methodical instructions
what is mixed economy
what is a deadweight loss? how monopoly creates a deadweight loss?
Ashraf Reply
who are u?
what it this
hi y'all
how does group chat help y'all 🤔
hi y'all
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how does group chat help y'all 🤔
to learn from one another
oh okay
what is type of economic
taiwo Reply
how to understand basics of economics
Aarif Reply
what is demand schedle
Princess Reply
When you make a Scedule of the demand you made
this is helpful for rbi grade b
Prema Reply
What is macroeconomics
Kauna Reply
It's one of the two branches of Economics that deal with the aggregate economy.
it's about inflation, occupation, gdp and so on
What is differences between Microeconomics and Macroeconomic?
microeconomics focuses on the action of individual agents in the economy such as businesses, workers and household. while macroeconomics looks at the economy as a whole. it focuses on broad issues in the economy such as government deficit, economy growth, levels of exports and imports, and
inflationary increase in prices

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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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