A:

The balance of payments is the record of any payment or receipt between one nation and its nationals with any other nation. This amount includes that nation's current account, as well as its capital account and financial account.

A current account records the flow of goods and services in and out of a country, including tangible goods, service fees, tourism receipts and money sent directly to other countries, either given as aid or sent to families. Tangible goods and services make up the balance of trade, which is also folded into the balance of payments.

The current account does not include the capital account or the financial account. The capital account refers to any and all international capital transfers, including nonfinancial assets. The financial account deals with money related to foreign reserves and private investments in businesses, bonds, stocks and real estate.

Unlike the current account, which is expected to run at a surplus or deficit, a nation's balance of payments should theoretically be zero. If a Greenland national buys a jacket from a Canadian company, then Greenland gains a jacket while Canada gains the equivalent amount of currency. To reach zero, a balancing item is added to the ledger to reflect the value exchange. According to the International Monetary Fund's Balance of Payments Manual, the balance of payment formula, or identity, is summarized as:

Current Account + Financial Account + Capital Account + Balancing Item = 0

As of March 2015, it is worth noting the United States is an exception to the rule that the balance of payments must be at zero and is currently running at a deficit.

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