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Which of the following is not a component of current account of BoP?
- a)Balance of trade
- b)Balance of invisibles
- c)Investment income
- d)All of the above are the components of current account
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Which of the following is not a component of current account of BoP?a)...
Components of Current Account of BoP
The current account of BoP comprises the following components:
1. Balance of Trade (BOT)
Balance of Trade is the difference between the value of exports and imports of goods. It is the largest component of the current account and includes visible items only.
2. Balance of Invisibles (BOI)
Balance of Invisibles is the difference between the value of visible exports and imports along with the value of invisible transactions. Invisible transactions include services, remittances, interest, and dividends.
3. Investment Income
Investment Income includes earnings from foreign investments, such as dividends and interest payments. It is a part of the current account because it represents the income earned by residents of a country from their investments abroad.
4. Current Transfers
Current Transfers include government grants, aids, and donations from foreign countries. It represents the transfer of resources from one country to another without any corresponding payment.
Not a Component of Current Account of BoP
All of the above are the components of the current account of BoP. Therefore, option D is not correct as it implies that there is at least one component that is not included in the current account.
The current account of BoP comprises the following components:
1. Balance of Trade (BOT)
Balance of Trade is the difference between the value of exports and imports of goods. It is the largest component of the current account and includes visible items only.
2. Balance of Invisibles (BOI)
Balance of Invisibles is the difference between the value of visible exports and imports along with the value of invisible transactions. Invisible transactions include services, remittances, interest, and dividends.
3. Investment Income
Investment Income includes earnings from foreign investments, such as dividends and interest payments. It is a part of the current account because it represents the income earned by residents of a country from their investments abroad.
4. Current Transfers
Current Transfers include government grants, aids, and donations from foreign countries. It represents the transfer of resources from one country to another without any corresponding payment.
Not a Component of Current Account of BoP
All of the above are the components of the current account of BoP. Therefore, option D is not correct as it implies that there is at least one component that is not included in the current account.
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Which of the following is not a component of current account of BoP?a)...
Current account of BoP records all such transactions which have no impact on either assets or liabilities of the county. All of the items are such which do not impact the assets or liabilities.
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