This is Bob Doughty with the VOA Special English EconomicsReport.

The United States recently reported a record deficit in itscurrent account balance. The current account is a measure of thenation's trade with other countries. Last year, America's combineddeficit on trade in goods, services and other economic activity roseto almost five-hundred-forty-two-thousand-million dollars. That isnearly thirteen percent more than the record current account deficitset in two-thousand-two.

A deficit is often described as a shortage. This is true for thefinancial situation of an individual. For example, if you spend morethan your earn, you must borrow from a creditor.

However, economists see deficits differently. When money is takenaway in one place, it becomes a credit someplace else. It all mustbalance. This does not mean that deficits are good necessarily. Itjust means that a deficit shows that another economic activity isincreasing.

In two-thousand-three, the United States had a huge trade deficitin goods. It had a moderate trade surplus in services of aboutsixty-thousand-million dollars. But, the question remains, how didthe United States pay for everything it bought?

The answer is that the United States paid in dollars. Othercountries, then, accepted those dollars. They could then use themoney to buy American goods, or they could buy American investments.

That is what has happened since the United States developed largetrade deficits in the nineteen-eighties. Countries that trade withthe United States have increasingly invested in it. This foreigninvestment is recorded in the nation's financial account.

Last year, other countries investedfive-hundred-seventy-nine-thousand-million dollars more in Americathan it invested in them. That investment surplus is greater thanthe trade deficit.

Foreign investment has become an important part of economicdevelopment in the United States. In nineteen-ninety-three, foreignmoney represented about nine-percent of all investment activity inAmerica. By two-thousand, that had grown to almost twenty-fivepercent.

So does this mean that trade deficits are cancelled out byforeign investment? The short answer is no. The widest measure ofinvestment flow in and out of the country is called the capitalaccount. It shows that the United States has a deficit ofthree-thousand-million dollars.

This VOA Special English Economics Report was written by MarioRitter. This is Bob Doughty.