What does the balance of payments account measure?

The balance of payments account provides a comprehensive record of all economic transactions between residents of a country and nonresidents over a specific period. This includes not only cash flows related to trade in goods and services but also capital flows, investments, and transfers. By encompassing every transaction—whether it’s trade of goods, services, capital transfers, or financial investments—the balance of payments captures the overall economic relationships and flows between a country and the rest of the world.

This broad scope is essential for understanding a country's financial position globally. For example, if a country is running a trade deficit, that information can be gleaned from the balance of payments, along with insights into the level of foreign investment and capital inflows or outflows.

The other choices, while possibly relevant to various aspects of economic relationships, fail to capture the full range of transactions included in the balance of payments. This comprehensive view is crucial for analysis and policymaking, as it reflects the impacts of all types of economic interactions.