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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 Rights
2. Foreign assets
3. Balance of invisibles
4. Special Drawing Rights
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
Correct answer is option 'C'. Can you explain this answer?
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With reference to Balance of Payments, which of the following constitu...
Current account includes balance of trade (exports-imports), net remittances, Trade in services. SDRs count as foreign assets
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With reference to Balance of Payments, which of the following constitu...
Current Account in Balance of Payments
The Balance of Payments (BoP) is a record of all the economic transactions between a country and the rest of the world. It is divided into two main accounts – the Current Account and the Capital Account.
The Current Account captures the transactions that involve the exchange of goods, services, income, and transfers between residents of a country and the rest of the world. The following items constitute the Current Account:
1. Balance of Trade: It represents the difference between the exports and imports of goods. If a country exports more than it imports, it has a surplus in the trade balance, and vice versa.
2. Balance of Invisibles: It includes the net income from services, such as tourism, transportation, and financial services. It also includes remittances from workers abroad and other current transfers.
The balance of invisibles is often referred to as the services balance, and it is calculated by subtracting the payments for imports of services from the receipts for exports of services.
3. Special Drawing Rights (SDRs): SDRs are a reserve asset created by the International Monetary Fund (IMF) to supplement the existing reserves of member countries. SDRs are allocated to member countries based on their IMF quotas.
Therefore, the correct answer is option 'C' – 1 and 3.
The Balance of Payments (BoP) is a record of all the economic transactions between a country and the rest of the world. It is divided into two main accounts – the Current Account and the Capital Account.
The Current Account captures the transactions that involve the exchange of goods, services, income, and transfers between residents of a country and the rest of the world. The following items constitute the Current Account:
1. Balance of Trade: It represents the difference between the exports and imports of goods. If a country exports more than it imports, it has a surplus in the trade balance, and vice versa.
2. Balance of Invisibles: It includes the net income from services, such as tourism, transportation, and financial services. It also includes remittances from workers abroad and other current transfers.
The balance of invisibles is often referred to as the services balance, and it is calculated by subtracting the payments for imports of services from the receipts for exports of services.
3. Special Drawing Rights (SDRs): SDRs are a reserve asset created by the International Monetary Fund (IMF) to supplement the existing reserves of member countries. SDRs are allocated to member countries based on their IMF quotas.
Therefore, the correct answer is option 'C' – 1 and 3.
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With reference to Balance of Payments, which of the following constitutes/constitute the Current Account?1. Balance of trade2. Foreign assets3. Balance of invisibles4. Special Drawing RightsSelect the correct answer using the code given below.a)1 onlyb)2 and 3c)1 and 3d)1, 2 and 4Correct answer is option 'C'. Can you explain this answer?
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