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: Capital flows
Option 4: Financial account
Correct Answer: Capital flows
Solution : The correct answer is (c) Capital flows
Capital flows is not a component of the current account in the balance of payments. The current account of the balance of payments includes transactions related to the trade of goods and services (exports and imports), income from abroad (such as earnings from investments or employment), and unilateral transfers (such as foreign aid or remittances). Capital flows, on the other hand, are recorded in the financial account of the balance of payments and represent transactions related to the buying and selling of assets between residents and non-residents, such as foreign direct investment, portfolio investment, and changes in reserve assets.
