Now, let's see how a country can keep track of the money going into and out of its economy. So we're going to use what's called a balance of payments, okay? If you've taken an accounting class, this is going to look similar to one of the financial statements you've done, maybe like a balance sheet and income statement. It's kind of somewhere in the middle there, okay? A country that trades with other countries, that's what we're focused on here. They're called open economies and they're basically economies that trade with each other, okay? And we're going to use this balance of payments which just is a record of the transactions with other countries. We want to know how much money was going into our economy, how much was going out of our economy, right? We keep track of this every year. So what I have here is an example balance of payments for the United States from the year 2014 here and notice it's in billions of dollars. So these numbers are really big here.
What I want you to notice is that we've got 2 main categories here and we've got a third one that's not so important. But these 2 are the main ones that we're going to spend our time with: the current account and the financial account. And then down here, we've got the capital account which is not so important. You could see that it has a trivial balance here. It even rounds down to 0, okay? So let's look. We're going to go into more details in other videos about these, but let's go in just on a high level, let's talk about these. Notice what we have in our current account. We've got exports of goods, imports of goods, exports of service, imports of services. Here, we're talking about our net exports. So remember net exports, well, this is just exports minus imports, okay? Exports minus imports equal, whoops, imports. That's equal to our net exports importing and notice, you can see that we have a negative balance here for the United States. That means we're importing more than we're exporting, right? And you can see that that's a bigger number here in the import of goods up above, okay? And it's been that way for a while, we've had this trade deficit where we're importing more stuff than we're exporting, but you can see with services, it kind of balances it back just a little bit where we're exporting more than we're importing.
So we're exporting more than we're importing when it comes to services. But in total, when we think of our net exports, it's negative, right? We have more imports than exports. So other categories here, you see are investment income. So these are the three main ones. We've got our net exports, we've got our investment income and then transfers, okay? We'll get into more details about those in the other videos. The main one to think about here is those exports. The financial account, this is dealing with more long-term things. This is dealing with holdings of US assets, by foreigners and the US owning stuff overseas as well. So this is generally when we own stocks and bonds, this is when we own like property in other countries, own factories or own housing in other countries, things like that. And you can see there's a balance here. This is foreign holding of US assets, so when foreigners hold our assets and where US hold foreign assets, okay? And you can see that the foreigners are holding more US assets, so that's money coming into our economy, right?
Because foreigners are buying US assets, so that means there's money coming in and that's why we see a positive number there. The balance on capital count is very trivial things, not a big deal in this class. And then, we have the statistical discrepancy because the rule of the balance of payments is that it must equal 0. Okay? Must equal 0 at the end. Because if you think about this theoretically, right, all the money going out of the economy has to be balanced with money coming in. In the long term or the short term, there has to be this balance, right? And that's why it's called the balance of payments. When there's money going out, there has to be something coming in in return, right? If we're importing goods, well, money has to be leaving. If we're exporting goods, money has to be coming in, right? There has to be this balance. So we'll get into a little more detail about that in the next video.
But that's one of the main rules to remember here when it comes to the balance of payments. Just remember that it must equal 0. You might just get a quick multiple-choice question like that about the balance of payments. That's the rule, it must equal 0. So as a summary, when we think about the current account, we're thinking about the short term. The current account, think current, short-term flow of funds into and out of a country. Like when we're talking about those exports and imports, things like that. Whereas the financial account is dealing with long-term flows of funds. Like when we are buying a house overseas, right? Where we're thinking of these long-term types of assets, okay? And like I said, the capital account, it's trivial things that we're not going to get into in this class. Pretty much beyond the scope of the class. This is like when people leave the US and they bring stuff with them, them, when they send, yeah, like when they send their things overseas when they leave. Intangible assets, debt forgiveness, when we have some debt overseas and we forgive it, right? These types of things, we're not going to get into in this class. We're going to focus more on these 2, okay? Capital account or excuse me, current account and financial account. Cool? Alright. Let's pause here and let's move on to the next part.
