an Argentine logging company purchases American-made chain saws. This would be entered as a item under the section of the U.S. current account.
The net value of the merchandise and services accounts combined gives the value of within the national income accounting equation GDP = C + I + G + X. If you rewrite the equation as X = GDP – (C + I + G), you can see that the current U.S. value of X implies that . This means that the United States is producing than it is consuming, making it a .
Any surplus or deficit in one account must be offset by deficits or surpluses in other balance-of-payments accounts. Because the current account is in , the excess of foreign currency held by Americans must either be loaned to foreigners, or used to buy foreign stocks or bonds. All of these transactions are then recorded in the account. Since any imbalance in one account automatically leads to an equal, but opposite, imbalance in the other, the balance of payments is always .