To explain:Transaction’s category that appears in current account, current account balance, relationship between net exports and current account balance.
Explanation of Solution
The balance of payment account records all the transactions in the different accounts for instance, the current account records the transections related to merchandise, service, income and unilateral transfers accounts. However, the current account balance refers to the sum of all these transactions.
The current account balance and net export are positively related. If the value of net export is lower, then the value of the current account balance will also be lower. However, the negative value of net export will lead to a deficit in the current account balance.
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Chapter 5 Solutions
Pearson Etext For Macroeconomics -- Access Card (10th Edition)