| Which of the following constitute Capital Account? |
| 1. Foreign Loans |
| 2. Foreign Direct Investment |
| 3. Private Remittances |
| 4. Portfolio Investment |
| Select the correct answer using the codes given below. |
A) 1, 2 and 3
B) 1, 2 and 4
C) 2, 3 and 4
D) 1, 3 and 4
Correct Answer: B
Solution :
Exp. [b] The Capital Account and the Current Account are the two main components of a nation's balance of payment. Whereas, the Current Account reflects a nation's net income, the Capital Account reflects the net change in ownership assets. Thus, it is clear that private remittances are part of the Current Account. On the other hand, foreign loans, FII (portfolio investment) and FDI (Foreign Direct Investment) are part of the Capital Account.
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