Question:
In the context of Balance of Payments accounting, which of the following transactions is/are NOT recorded under the Current Account?
In the context of Balance of Payments accounting, which of the following transactions is/are NOT recorded under the Current Account?
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Current account = goods, services, income, transfers.
Financial/capital account = cross-border asset trades \& official reserves.
Updated On: Sep 1, 2025
- Merchandise trade
- Unilateral transfer payments
- Purchase of international financial assets
- Purchase of foreign currency by the central bank
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The Correct Option is C, D
Solution and Explanation
Step 1: What the Current Account contains. It records trade in goods and services, primary income (interest, profits, wages), and secondary income/transfers. Hence (A) merchandise trade and (B) unilateral transfers {are} current-account items.
Step 2: What is not in the Current Account. Acquisitions of financial assets/liabilities—like buying foreign bonds, equities, deposits—are part of the financial (capital) account. Likewise, official reserve transactions (central bank purchasing foreign currency) are recorded under the financial account/official reserves. Therefore (C) and (D) are not current-account items.
Final Answer: (C), (D)
Step 2: What is not in the Current Account. Acquisitions of financial assets/liabilities—like buying foreign bonds, equities, deposits—are part of the financial (capital) account. Likewise, official reserve transactions (central bank purchasing foreign currency) are recorded under the financial account/official reserves. Therefore (C) and (D) are not current-account items.
Final Answer: (C), (D)
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