Question : Which of the following is an example of a capital account transaction in the Balance of Payments?
Option 1: Import of goods
Option 2: Export of services
Option 3: Foreign investment in domestic real estate
Option 4: Repayment of foreign debt
Correct Answer: Foreign investment in domestic real estate
Solution : The correct answer is (c) Foreign investment in domestic real estate.
A capital account transaction in the Balance of Payments refers to activities that involve changes in a country's foreign assets and liabilities. It includes capital transfers and the acquisition and disposal of non-produced, non-financial assets.
Foreign investment in domestic real estate: This is an example of a capital account transaction. When foreign entities invest in domestic real estate, it involves a change in a country's non-produced, non-financial assets and is recorded in the capital account.
