Question : Which of the following is not a component of the financial account?
Option 1: Foreign direct investment
Option 2: Portfolio investment
Option 3: international borrowing
Option 4: Current account transactions
Correct Answer: Current account transactions
Solution : The correct answer is (d) Current account transactions
Current account transactions are not a component of the financial account. The financial account of the Balance of Payments (BoP) captures the inflows and outflows of financial assets and liabilities between residents and non-residents. It consists of various types of transactions related to cross-border investments and financing.
Option 3: International borrowing
Option 4: Merchandise trade balance
Question : Which of the following is not a component of the capital account?
Option 4: International transfers and gifts
Option 3: Official reserve assets
Option 4: Current account balance
Option 3: international transfers and gifts
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