What is the difference between current account vs, capital account - ProProfs Discuss
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What is the difference between current account vs, capital account shortages/surpluses?

Asked by Merlin, Last updated: Nov 25, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

The current account measures the flow of money into the country from the sale of goods and services versus the flow of money out of the country from the purchase of goods and services. If canada is buying more products from abroad than we are selling, we are sending more money overseas than we are earning. This results in a need to finance our excess amount of spending by borrowing funds. This continued borrowing leads to higher and higher levels of debt a succession of current account deficits gives rise to successive current account surpluses and thus a larger debt. Asuccession of current account surpluses gives rise to successive capital account surpluses, allowing canada to become a larger creditor nation.

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