ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Capital account shows the net change in the physical or financial asset ownership for a country. It includes Foreign Direct Investment, Portfolio Investment, foreign loans, changes in reserve account etc. Private remittances come under Current account and not Capital account.

Detailed explanation-2: -Foreign direct investment (FDI) refers to long-term capital investment, such as the purchase or construction of machinery, buildings, or whole manufacturing plants. If foreigners are investing in a country, that represents an inbound flow and counts as a surplus item on the capital account.

Detailed explanation-3: -The main accounts for presenting FDI statistics are FDI positions, FDI transactions and FDI income. These accounts are described below along with a description of other changes that may impact on the value of FDI positions and transactions.

Detailed explanation-4: -Capital account is the account of a natural person, i.e. an account of person who is alive. Hence, it can be classified as a personal account.

Detailed explanation-5: -The capital account is a record of the inflows and outflows of capital that directly affect a nation’s foreign assets and liabilities. It is mainly concerned with the transactions which are a part of international trade. It is also a part of the balance of payments.