Question

    Which of the following constitute Capital Account?

    I. Foreign Loans II. Foreign Direct Investment III. Private Remittances IV. Portfolio Investment Select the correct answer using the code given below:
    A I, II and III Correct Answer Incorrect Answer
    B I, II and IV Correct Answer Incorrect Answer
    C II, III and IV Correct Answer Incorrect Answer
    D I, III and IV Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Capital Account is a sub-component under the Balance of Payments. It keeps a record of transactions of international nature which are concerned with altering either an Asset or Liability for the domestic country.  Foreign Loans, Foreign Direct Investment and Portfolio Investment form a component of the Capital Account as they are adding up to the existing liabilities of the country as they warrant a future repayment liability.

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