Question : Which of the following is not a component of the capital account?
Option 1: Foreign direct investment
Option 2: Portfolio investment
Option 3: Official reserve assets
Option 4: Current account balance
Correct Answer: Current account balance
Solution : The correct answer is (d) Current account balance
The capital account consists of various types of capital flows and transactions between a country and the rest of the world. It records the changes in a country's ownership of foreign assets and liabilities.
On the other hand, the current account balance is not a component of the capital account. The current account records the flow of goods, services, income, and transfers between a country and the rest of the world. It includes trade balances, income from investments, and unilateral transfers. It is separate from the capital account, which focuses on financial flows and changes in ownership.
