Question : The balance of payments is a systematic record of a country's:
Option 1: Imports and exports only
Option 2: Imports and financial transactions only
Option 3: Imports, exports, and financial transactions
Option 4: Imports, exports, and domestic production
Correct Answer: Imports, exports, and financial transactions
Solution : The correct answer is (c) Imports, exports, and financial transactions.
The balance of payments is a comprehensive accounting of all economic transactions between a country and the rest of the world over a specific period. It is divided into three main components: the Current Account, the Capital Account, and the Financial Account.
The Current Account includes transactions related to imports and exports of goods and services, income from investments, and unilateral transfers (such as foreign aid or remittances).
The Capital Account records capital transfers, such as the transfer of ownership of fixed assets, and the Financial Account tracks financial transactions, including foreign direct investment, portfolio investment, borrowing and lending, and changes in reserves.
