The chart shows the components of the current account. Some boxes are marked P, Q, R and S.
Which of the following is correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → P – Trade in goods; Q – Net factor income; R – Net non-factor income; S – Transfer payments
The current account has three parts: trade in goods, trade in services and transfer payments. Trade in services splits into net factor income and net non-factor income.
So P is trade in goods. Q and R sit under trade in services: Q is net factor income and R is net non-factor income (shipping, banking, tourism). S is transfer payments (gifts, remittances and grants).
NCERT (2026-27): “6.1.1 Current Account Current Account is the record of trade in goods and services and transfer payments. Figure 6.1 illustrates the components of Current Account. Trade in goods includes exports and imports of goods. Trade in services includes factor income and non-factor income transactions. 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. They could be given by the government or by private citizens living abroad.”
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