Economy
Balance of Payments
Definition
A comprehensive record of all economic transactions between a country's residents and the rest of the world.
Explanation
The balance of payments has three components: the current account (trade in goods/services), the capital account (asset transfers), and the financial account (investment flows). By definition, the overall balance of payments must equal zero — a current account deficit must be financed by a financial account surplus (capital inflows). Persistent imbalances can signal economic vulnerabilities.