Question

The ________ of the balance of payments measures all international economic transactions of financial assets.

Select one:

a. current account

b. capital/financial account

c. merchandise trade account

d. services account

Answer 1

Balance of payment records all the economic transactions that takes place between a country and rest of the world.

These transaction pertains to goods and services, investment income, transfer payments as well as sale and purchase of financial assets.

Balance of payment, in broad terms, can be classified into two parts -

Current account

Capital/financial account

Current account includes transaction pertains to goods and services, investment income, transfer payments.

Capital/financial account includes transactions pertains to sale and purchase of financial assets.

Thus,

The capital/financial account of the balance of payments measures all international economic transactions of financial assets.

Hence, the correct answer is the option (b).