Question : Which of the following statements is true about the Balance of Payments (BoP)?
Option 1: It measures the inflows and outflows of money in a country's economy.
Option 2: It measures the trade balance of a country.
Option 3: It only covers current account transactions.
Option 4: It only covers capital account transactions.
Correct Answer: It measures the inflows and outflows of money in a country's economy.
Solution : The correct statement is a) It measures the inflows and outflows of money in a country's economy.
The Balance of Payments (BoP) is a record of all economic transactions between the residents of one country and the residents of all other countries over a specific period. It includes both current account transactions and capital account transactions. The current account tracks the inflows and outflows of goods, services, income, and transfers, while the capital account tracks the inflows and outflows of financial assets and liabilities.
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