Read the passage carefully and answer the questions based on the passage:

Balance of Payment

Balance of Payment is defined as the statement of accounts of a country's inflows and outflows of foreign exchange during a specified period of time. It consists of two main accounts, i.e. Current Account and Capital Account. A deficit or surplus in the current account is determined by the country's exports and imports, whereas the capital account records transactions involving non-financial and financial assets.

India's BOP typically reflects its trade deficit, services surplus and capital inflows. To finance the deficit in its overall BOP, few transactions take place in its official reserves of foreign exchange.

What does the BOP record?

Economic transactions between residents of a country and rest of the world.

The correct answer is Option (3) → Economic transactions between residents of a country and rest of the world.

The passage defines the Balance of Payment as "the statement of accounts of a country's inflows and outflows of foreign exchange during a specified period of time," which represents the economic transactions between a country's residents and the rest of the world.

The Balance of Payment records all economic transactions between the residents of a country and the rest of the world over a specified period. These transactions include the inflows and outflows of foreign exchange related to trade in goods and services, income flows, transfers, and capital movements.