Question : Which of the following is a capital account transaction?
Option 1: Receiving foreign aid
Option 2: Making a foreign direct investment
Option 3: Exporting goods and services
Option 4: Borrowing from a foreign bank
Answer (1)
25th Jan, 2024
Correct Answer: Making a foreign direct investment
Solution : The correct answer is (b) Making a foreign direct investment
Making a foreign direct investment (FDI) is a capital account transaction. The capital account of the Balance of Payments (BoP) captures transactions related to the acquisition or disposal of non-financial assets, such as land, buildings, machinery, and equity interests in enterprises, between residents and non-residents.
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