ECONOMICS (CBSE/UGC NET)

ECONOMICS

BALANCE OF PAYMENTS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
In which account are foreign direct investments included
A
financial account
B
current account
C
income account
D
net capital transfer account
Explanation: 

Detailed explanation-1: -Capital transferred out of a country for the purpose of investing in a foreign country is recorded as a debit in either of these two accounts. Specifically, if it’s a portfolio investment, it’s recorded as a debit in the financial account. If it’s a direct investment, it’s recorded as a debit in the capital account.

Detailed explanation-2: -The current account includes all the transactions related to export and import of goods and services, investment income, and unilateral transfers (remittances, gifts, grants etc.). The capital account includes all international asset transactions (FDI, FPI etc.).

Detailed explanation-3: -The 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 the reserve account, etc.

Detailed explanation-4: -Description: The capital expenditure and income is tracked by way of funds in the form of investments and loans flowing in and out of an economy. This account comprises foreign direct investments, portfolio investments, etc. It gives a summary of the net flow of both private and public investment into an economy.

Detailed explanation-5: -A direct investment is a cross-border investment associated with a resident in one economy having control of, or a significant degree of influence over, the management of an enterprise that is resident in another economy.

There is 1 question to complete.