Which of the following statements are correct?
(A) A surplus current account means that the nation is a lender to other countries.
(B) Compensation of employees is a part of net non-factor income.
(C) Invisibles include services, transfers and flows of income between countries.
(D) Non-factor income is the net sale of service products like shipping, banking and tourism.
(E) Transfer payments are receipts for which the residents provide goods or services in return.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A), (C) and (D) only
(A) A surplus current account means that the nation is a lender to other countries. — Correct. It earns more from abroad than it spends, so it lends the difference.
(B) Compensation of employees is a part of net non-factor income. — Incorrect. Pay to workers is income from a factor of production, so it is net factor income.
(C) Invisibles include services, transfers and flows of income between countries. — Correct. These are the items other than goods.
(D) Non-factor income is the net sale of service products like shipping, banking and tourism. — Correct. Shipping, banking and tourism are services sold to other countries; they are not earnings of labour, land or capital.
(E) Transfer payments are receipts for which the residents provide goods or services in return. — Incorrect. Transfers are received free, with nothing given in return.
NCERT (2026-27): “6.1.1 Current Account … Transfer payments are the receipts which the residents of a country get for ‘free’, without having to provide any goods or services in return. They consist of gifts, remittances and grants. …” “Balance on Current Account … A surplus current account means that the nation is a lender to other countries and a deficit current account means that the nation is a borrower from other countries.” “Balance on Current Account … Invisibles include services, transfers and flows of income that take place between different countries. Services trade includes both factor and non-factor income. Factor income includes net international earnings on factors of production (like labour, land and capital). Non-factor income is net sale of service products like shipping, banking, tourism, software services, etc.”
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