Final answer:
Merchandise inventory is the goods a business has made but not yet sold, stored as assets. Merchandise balances are calculated by exporting goods minus imports. This and other factors like services and income contribute to the overall current account balance.
Step-by-step explanation:
Merchandise inventory refers to the goods that a business has produced but has not yet sold to consumers. These goods are stored in warehouses or on store shelves. It is an asset on the balance sheet for businesses, as it represents products that are expected to be sold for profit. Merchandise inventory can fluctuate based on the performance of a business—it tends to decrease when sales are better than expected and increase when sales are poorer than expected.
A merchandise trade deficit occurs when imports exceed exports, as showcased in the cited Table 9.1 and Table 10.1, indicating a negative trade balance. To calculate the merchandise balance and the current account balance, one would need to subtract the total imports of goods from the total exports. This would provide the merchandise trade balance. Adding the balances of services, income, and unilateral transfers to the merchandise trade balance results in the current account balance.