Correct Answer: Foreign investment in domestic stocks

Solution : The correct answer is (c) Foreign investment in domestic stocks.

The capital account in the balance of payments records capital flows between countries. It includes transactions related to investments and changes in a country's foreign assets and liabilities. The capital account captures the movement of financial capital across borders.

Foreign investment in domestic stocks, such as when investors from one country purchase stocks or shares of domestic companies in another country, is an example of a capital account item. This transaction involves the transfer of financial capital from one country to another and affects a country's stock of foreign assets and liabilities.