Distinguish between the current account and the capital/financial account in the balance of payments.

• A. Current account only tracks international capital flows and investment.
• B. Current account records trade in goods and services, income, and transfers; capital/financial account records investments and financial assets; deficits/surpluses must balance.
• C. Current account records central bank reserve changes.
• D. Capital/financial account records only government debt issuance.

Answer: (B)