If you’re anything like me and got this far and still confused by the Trade balance and Current Account Balance then this blog is for you.
As we all know by now (I – S) + (G – T) + (X – M) = 0.
It all seems very self explanatory Net Private Sector Saving + Government Balance + Current Account Balance = 0.
That is the catch (X-M) is only a stylised representation of the Current Account. (X-M) more accurately is the Trade Balance.
As usual we will be drawing heavily on Bill Mitchell’s work. I think we will let Bill take it from here.