Practicing Success
Identify the capital account transaction from the following : |
Export of goods Import of goods Net Invisibles External commercial borrowings |
External commercial borrowings |
The correct answer is option (4) : External commercial borrowings External commercial borrowings (ECBs) are considered a capital account transaction because they involve the inflow of capital from foreign sources. ECBs refer to loans availed by entities like corporations , financial institutions, or the government from foreign sources. This borrowing represents capital inflow into the country, affecting the capital structure and contributing to economic development. In contrast, options (1) Export of goods, (2) Import of goods, and (3) Net Invisibles are typically associate with the current account, which deals with transactions of goods and services. |