Which of the following constitute a Capital Account?1. Foreign Loans2. Foreign Direct Investment3. Private Remittances4. Portfolio InvestmentSelect the correct answer using the codes given below:
✓ Correct answer: b) 1, 2 and 4
ExplanationStatement 1, 2 and 4 are correct : The Capital Ac- count in a country’s Balance of Payments (BoP) records the transactions that involve the transfer of capital assets and liabilities between residents and non-residents.It primarily includes:Foreign Loans are borrowings from foreign entities by the government, private sector, or other institutions.Foreign Direct Investment (FDI) made by foreign entities in the domestic economy, typically involving a significant degree of control or influence over the business operations.Portfolio Investment in financial assets such as stocks and bonds by foreign investors, without the intention of controlling or managing the enterprise.Statement 3 is incorrect : Private remittances (money sent by individuals working abroad back to their home country) are considered current transfers and are part of the Current Account, not the Capital Account.They represent a flow of in- come, not a capital investment.Current Account Capital Account MeaningRecords imports and exports of visible and invisiblesShort term implication transactionsCov
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