Chapter 41, Problem 1MCQ

To determine

The correct option for the current account.

Answer to Problem 1MCQ

Option b is correct.

Explanation of Solution

Explanation for the correct option:

b.

Current account on balance of payment includes the visible and invisible goods and services related transactions. It includes net transfers, factor income, etc. It includes exports and imports-related transactions. Therefore, option b is correct.

Explanation for incorrect options:

a.

The current account includes net transfers rather than gross international transfers. Therefore, option a is incorrect.

c.

Purchase and sales of assets are not included in the current account balance. Therefore, option c is an incorrect answer.

d.

Purchase and sales of an asset are not a part of the current account balance. Therefore, option d is incorrect.

e.

Similarly, sales of an asset to a foreigner are not a part of current activity, it is included in the capital account instead of the current account balance. Therefore, option e is incorrect.

Economics Concept Introduction

Balance of payment: Balance of payment is the recording of transactions that occur with one country and the rest of the world over a financial period. It records the trading of goods and services and transfers payments.