The balance of payments records the transactions in goods, services and assets between residents of a country with the rest of the world for a specified time period. Identify the main accounts in the balance of payments.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Current account and capital account.
The balance of payments (BOP) is divided into two main, primary accounts:
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Current Account: Records transactions related to currently produced goods, services, investment income (primary income), and unilateral transfers (secondary income) between residents and the rest of the world.
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Capital Account: Records international transfers of assets. (Note: According to the IMF's latest standards, this is often combined with the Financial Account, which records transactions involving financial assets and liabilities, like FDI, portfolio investment, and reserve assets).
