Question : Which of the following is not a component of the current account in the balance of payments?
Option 1: Goods and services
Option 2: Income from abroad
Option 3: Transfer payments
Option 4: Capital flows
Correct Answer: Capital flows
Solution : The correct answer is d) Capital flows.
The current account in the balance of payments is a record of a country's transactions with the rest of the world in goods, services, income, and unilateral transfers.
Capital flows: Capital flows are not a component of the current account. They are part of the capital and financial account in the balance of payments. Capital flows represent the movement of financial capital between countries, including foreign direct investment (FDI), portfolio investment, loans, and other financial transactions.
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