Question : Which of the following is a component of the capital account?
Option 1: Net exports of goods and services
Option 2: Net income from abroad
Option 3: Foreign direct investment
Option 4: Net transfer payments
Answer (1)
23rd Jan, 2024
Correct Answer: Foreign direct investment
Solution : The correct answer is c) Foreign direct investment
Foreign direct investment (FDI) is a component of the capital account of the Balance of Payments (BoP). The capital account tracks the inflows and outflows of financial assets and liabilities between residents and non-residents. Foreign direct investment refers to the investment made by residents of one country in physical assets, such as factories or businesses, in another country.
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