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Question

Which one of the following items is included in the capital account of the balance of payments of a country?

A
Invisibles
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B
Investment incomes
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C
Commercial borrowings
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D
Private transfers
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Solution

The correct option is C Commercial borrowings
The capital account of a country consists of its transaction in financial assets in the form of short-term and long-term lending and borrowings and private and official investments.
There are two types of transactions in the capital account-private and government. Private transactions include all types of investments-direct and portfolio and short-term. Government transactions consist of loans to and from foreign official agencies.

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