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Perhaps most commonly, the current account balance is portrayed as the difference between a nation's exports, broadly defined, and its imports. From this perspective, the determinants of the current account balance are roughly the same as the determinants of the trade balance: exchange rates, prices, and incomes at home and abroad. Accordingly, the widening of the U.S. current account deficit is frequently attributed to the strengthening of the dollar since the mid-1990s, which led U.S. imports to be cheaper measured in dollars and U.S. exports to be more expensive in foreign currency.
According to a second perspective, the current account balance is defined as the difference between a nation's saving and its investment. This definition highlights the decline in the ratio of national saving to GDP over the past ten years, even as investment rates have moved up a bit on balance, as the central cause of the widening of the U.S. current account deficit.
Finally, because any excess of national spending over income must be financed by foreigners, the current account deficit is equivalent to the net inflow of capital from abroad. This approach points to the surge of capital inflows into our economy as the key development underlying the emergence of the large external deficit.