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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
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Charles
macroeconomics,microeconomics,positive economics and negative economics
Gladys
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Gladys
process of production
Mutia
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"
Elisha
what is land as a factor of production
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economics is how individuals bussiness and governments make the best decisions to get what they want and how these choices interact in the market
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What is Economic
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economic
Nwosu
Economics is the social science that deals with the unlimited human wants in the face of scarce (limited in supply) resources.
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Gift Reply
marker is the interaction of buying and selling
David
market refers to the interaction of the processes of buying and selling of commodities between the buyer and the seller.
stephen
market is a place where two parties gather to facilitate exchange of goods and services.
Yhaar
what are some good sources of information to find trends in various Industries
James
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Mutia
what is consumption
Raj
Using revenue
Prince
What is stock market
Prince
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
Prince
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
Devesh
Okay
Olatunde
meaning
KP
okay
Binta
I have a question
Binta
what is the importance of learning economics?
Thelma Reply
it helps to make the correct choice
Gladys
it helps firm to produce products that will bring more profit
Gladys
the difference between needs and wants
londiwe Reply
needs are things that we basically can't live without wants are just luxury things
Thelma
needs are things without them we can't live but want are things without we can live
KP
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KP
it's a process in which we give or receiving methodical instructions
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Amex
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When you make a Scedule of the demand you made
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Prema Reply
What is macroeconomics
Kauna Reply
It's one of the two branches of Economics that deal with the aggregate economy.
Mayen
it's about inflation, occupation, gdp and so on
alberto
What is differences between Microeconomics and Macroeconomic?
Bethrand
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
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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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