Question

The balance of payments includes all of the following except

a. transfer payments for welfare.

b. goods and services sold overseas.

c. foreign purchases of domestic assets.

d. imported goods and services.

e. capital goods purchased by foreigners.

Answer 1

Answer. (e) capital goods purchased by foreigners

Explanation: This answer can be found by eliminating the other options. The transfer payments are counted in current account. The goods and services sold overseas are exports and are counted in current account. The foreign purchases of domestic assets are an investment inflow and counted in capital account. The imported goods and services are imports and are counted in current account. So, only the last option is left which should not be counted. This is because it doesn't make sense to count the purchase of foreign capital goods by a foreigner in his own country. This doesn't have to do any thing with domestic economy.