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 of the Balance of Payments (BoP). The financial account specifically focuses on recording the inflows and outflows of financial assets and liabilities between residents and non-residents.
It's important to note that current account transactions, such as trade in goods and services, income flows, and transfers, are recorded separately in the current account, not in the financial account.
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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