Question : Which of the following is not a component of the capital account in the balance of payments?
Option 1: Foreign direct investment
Option 2: Loans to foreign countries
Option 3: Purchases of foreign currency by domestic residents
Option 4: Export and import of goods and services
Correct Answer: Export and import of goods and services
Solution : The correct answer is (d) Export and import of goods and services
The capital account in the balance of payments records the flows of financial assets between a country and the rest of the world. It includes transactions related to investment, loans, and changes in ownership of financial assets. The export and import of goods and services, on the other hand, is part of the current account, which measures the flows of goods, services, and income between a country and the rest of the world.
