Q: With reference to Balance of Payments, which of the following constitutes/constitute the Current Account?
a) Balance of trade
b) Foreign assets
c) Balance of invisibles
d) Special Drawing Right
The Correct Answer is 1 and 3 only.
The balance of payment
- It is a record of all monetary transactions made between the residents of one country and the rest of the world.
- A balance of payments deficit means the nation imports are more than it exports.
- The two components of the Balance of Payments are the current account and capital account.
- The current account includes trade in goods and services (Invisibles) and transfer payments etc.
- The capital account includes Foreign Direct Investment, Foreign Portfolio Investment, External Commercial Borrowings, SDR.
- The capital account records all international purchases and sales of assets such as money, stocks, bonds, etc
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