Question : The financial account of the Balance of Payments records:
Option 1: Imports and exports of goods
Option 2: Income from foreign investments
Option 3: International transfers of funds
Option 4: International borrowing and lending
Correct Answer: International borrowing and lending
Solution :
The correct answer is (d) International borrowing and lending.
The financial account of the Balance of Payments records international transactions related to borrowing and lending, including loans, bonds, stocks, and other financial instruments between residents and non-residents of a country. It captures capital flows in and out of the country, such as foreign direct investment, portfolio investment, and other capital transactions.
