Which of the following best describes the current account?

• A. Cross-border asset and liability flows
• B. Trade in goods/services and transfers
• C. Central bank reserves
• D. Government budget flows

Answer: (B)

The current account tracks your country's transactions with the rest of the world in terms of goods, services, and unilateral transfers. It records exports minus imports of goods and services and net transfers like remittances and foreign aid. This captures the everyday, real-flow side of international activity, not financial assets or reserves.

Cross-border asset and liability flows belong to the financial account, which tracks investments, loans, and changes in ownership of assets. Central bank reserves are part of the financial/accounting reserve side of international accounts. Government budget flows relate to fiscal policy and the public sector’s balance, not the current account.