Explain the relationship between the current account and the capital and financial account in the balance of payments.

The balance on the current account and the balance on the capital and financial account must always sum to zero. This is because any deficit or surplus in the current account in the top half of the statement automatically generates an offsetting international asset transfer that shows up in the capital and financial account in the bottom half of the statement. That is, current account deficits generate transfers of assets to foreigners, while current account surpluses generate transfers of assets from foreigners.