Under floating exchange rates, the capital account balance is equal to the negative of

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Under floating exchange rates, the capital account balance is equal to the negative of trade balance plus unilateral transfers. This is because the capital account records the flow of financial assets and liabilities between a country and the rest of the world, and the trade balance measures the flow of goods and services. Unilateral transfers refer to transfers of money or assets between countries that are made without any expectation of a return or compensation, such as foreign aid, remittances, or gifts. Therefore, the capital account balance represents the net flow of financial resources that a country requires to finance its trade deficit and unilateral transfers.

Under Floating Exchange Rates, the Capital Account Balance Is Equal