AP Macroeconomics Flashcards: Balance of Payments Accounts
Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026
Review key ideas with interactive flashcards. This set includes 16 cards to help you master important concepts.
What is the relationship between a nation's balance of trade and its current account?
A nation’s balance of trade (i.e., net exports) is one part of the current account.
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What is the relationship between a nation's balance of trade and its current account?
A nation’s balance of trade (i.e., net exports) is one part of the current account.
What are the three components of the Current Account (CA)?
The three components of the Current Account are net exports, net income from abroad, and net unilateral transfers.
A foreign company buys a factory in the United States. In which account is this transaction recorded for the U.S.?
This transaction is recorded in the Capital and Financial Account (CFA) as it represents the purchase of a U.S. asset by a foreign entity.
If a country has a Current Account (CA) surplus of $50 billion, what is the balance of its Capital and Financial Account (CFA)?
The Capital and Financial Account (CFA) must have a deficit of $50 billion, because CA + CFA = 0.
A country has net exports of +$100 billion, net income from abroad of -$20 billion, and net unilateral transfers of -$10 billion. Calculate its Current Account (CA) balance.
The Current Account balance is +$70 billion ($100B - $20B - $10B). This represents a CA surplus.
Explain why the overall Balance of Payments (BOP) is always considered to be balanced.
The BOP is always balanced because every transaction has a corresponding credit and debit entry, and the accounting system is designed so that the Current Account and Capital and Financial Account sum to zero.
If a country has a Current Account deficit, what must be true about its Capital and Financial Account?
If a country has a Current Account deficit, its Capital and Financial Account must have a surplus of an equal amount to ensure the Balance of Payments sums to zero (CA + CFA = 0).
What is the Balance of Payments (BOP)?
The BOP is an accounting system that records a country’s international transactions for a particular time period, consisting of the Current Account (CA) and the Capital and Financial Account (CFA).
A U.S. citizen purchases a car from a Japanese manufacturer. Is this a credit or a debit to the U.S. BOP account?
This transaction is a debit because it causes money to flow out of the U.S.
What does the Capital and Financial Account (CFA) record?
The Capital and Financial Account (CFA) records financial capital transfers and the purchases and sales of assets between countries.
What is the fundamental relationship between the CA and the CFA in the Balance of Payments?
The sum of the Current Account (CA) and the Capital and Financial Account (CFA) should be zero (CA + CFA = 0), meaning the sum of all credit entries matches the sum of all debit entries.
In the context of the BOP, what is a credit?
A credit is any transaction that causes money to flow into a country.
What does a surplus in the Capital and Financial Account (CFA) signify?
A surplus in the CFA signifies a net financial capital inflow, meaning more money is flowing into the country for asset purchases than is flowing out.
What does the Current Account (CA) record?
The Current Account (CA) records a country's net exports, net income from abroad, and net unilateral transfers.
In the context of the BOP, what is a debit?
A debit is any transaction that causes money to flow out of a country.
What does a deficit in the Capital and Financial Account (CFA) signify?
A deficit in the CFA signifies a net financial capital outflow, meaning more money is flowing out of the country for asset purchases abroad than is flowing in.