Question : The capital account records the flow of ___________and ______________between a country and the rest of the world.
Option 1: capital, financial
Option 2: goods, services
Option 3: transfers, income
Option 4: investments, remittances
Correct Answer: capital, financial
Solution : The correct answer is (a) capital, financial
The capital account records the flow of capital and financial transactions between a country and the rest of the world. It includes activities such as foreign direct investment, portfolio investment, international borrowing and lending, transfers of financial assets, and other capital transfers. The capital account reflects the changes in a country's ownership of foreign assets and liabilities, and it complements the current account, which records transactions related to trade in goods, services, income, and transfers.
