Economic Awareness - Sectors of Indian Economy
Which of the following best describes the difference between the Capital Account and the Financial Account in the Balance of Payments?
Which of the following best describes the difference between the Capital Account and the Financial Account in the Balance of Payments?
medium Q15 of 15
Step-by-Step Solution
Step 1: Understand the roles of Capital and Financial Accounts
The Capital Account records capital transfers and acquisition/disposal of non-produced, non-financial assets. The Financial Account records transactions in financial assets and liabilities such as investments and reserve assets.Step 2: Evaluate the options
Capital Account records capital transfers and non-produced assets; Financial Account records investments and reserve assets correctly distinguishes the Capital Account and Financial Account. Other options confuse trade, income, or reserves incorrectly.Final Answer:
Capital Account records capital transfers and non-produced assets; Financial Account records investments and reserve assets → Option AQuick Check:
Capital vs Financial Account = transfers/assets vs investments/reserves ✅
Quick Trick: Remember mnemonic: Current-Capital-Financial (C-C-F).
Common Mistakes:
MISTAKES- Mixing up capital transfers with financial investments.
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