Question : Which of the following is not a type of capital account transaction?
Option 1: Foreign direct investment
Option 2: Portfolio investment
Option 3: international borrowing
Option 4: Import of goods
Correct Answer: Import of goods
Solution : The correct answer is (d) Import of goods.
The capital account records transactions related to financial investments and transfers of financial assets between countries. Import of goods, on the other hand, falls under the current account, specifically under the category of merchandise trade.
The capital account includes transactions such as foreign direct investment (a long-term investment in a foreign country), portfolio investment (investment in stocks, bonds, and other financial instruments), and international borrowing (borrowing funds from foreign sources). These transactions involve the movement of financial capital across borders.
Import of goods, while an important component of international trade, is not considered a capital account transaction. It represents the movement of physical goods across borders and is recorded in the current account, specifically under the merchandise trade balance.
