Question

With reference to Balance of Payments, which of the following constitutes/constitute the Current Account?

1. Balance of trade
2. Foreign assets
3. Balance of invisibles
4. Special Drawing Right

Select the correct answer using the code given below.

• A.
  1 only
• B.
  2 and 3
• C.
  1 and 3
• D.
  1,2 and 4

Answer 1

The correct option is C

1 and 3
The current account tracks actual transactions, such as import and export goods. The capital account tracks the net balance of international investments. In other words, it keeps track of the flow of money between a nation and its foreign partners.Any deficit in current account is met by equal financial inflows in capital account to keep the BoP in balance.

The Balance of invisibles are that part of the balance of trade that refers to services and other products that do not result in the transfer of physical objects. Examples include consulting services, shipping services, tourism, and patent license revenue