{"id":1975,"date":"2024-03-30T15:03:20","date_gmt":"2024-03-30T09:33:20","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1975"},"modified":"2024-04-03T07:05:51","modified_gmt":"2024-04-03T01:35:51","slug":"q-with-reference-to-balance-of-payments-which-of-the-following-constitutes-constitute-the-current-account","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-with-reference-to-balance-of-payments-which-of-the-following-constitutes-constitute-the-current-account","title":{"rendered":"Q. With reference to Balance of Payments, which of the following constitutes\/ constitute the Current Account?"},"content":{"rendered":"\n
    \n
  1. Balance of trade<\/li>\n\n\n\n
  2. Foreign assets<\/strong><\/li>\n\n\n\n
  3. Balance of invisibles<\/li>\n\n\n\n
  4. Special Drawing Rights<\/li>\n<\/ol>\n\n\n\n

    Select the correct answer using the code given below.<\/p>\n\n\n\n

      \n
    • 1 only<\/li>\n\n\n\n
    • 2 and 3<\/li>\n\n\n\n
    • 1 and 3<\/li>\n\n\n\n
    • 1, 2 and 4<\/li>\n<\/ul>\n\n\n\n
      \n

      Answer: (c) 1 and 3<\/strong><\/p>\n<\/blockquote>\n\n\n\n

      Balance of Payments (BOP)<\/strong>:<\/h5>\n\n\n\n
        \n
      • Balance of Payment (BoP) of a country can be defined as a systematic statement of all economic transactions of a country with the rest of the world during a specific period usually one year.<\/li>\n\n\n\n
      • The BoP record the transactions in goods, services and assets<\/strong> between residents of a country with the rest of the world for a specified time period typically a year<\/strong>.<\/li>\n\n\n\n
      • It indicates whether the country has a\u00a0surplus or a deficit on trade.<\/strong>\n
          \n
        • When exports exceed imports, there is a trade surplus<\/strong> and when imports exceed exports there is a trade deficit.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n
        • Purposes of calculation of BoP:<\/strong>\n
            \n
          • Reveals the financial and economic status<\/strong> of a country.<\/li>\n\n\n\n
          • Can be used as an indicator<\/strong> to determine whether the country\u2019s currency value is appreciating or depreciating.<\/strong><\/li>\n\n\n\n
          • Helps the Government to decide on fiscal and trade policies.<\/strong><\/li>\n\n\n\n
          • Provides important information to analyze and understand the economic dealings of a country with other countries.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
          • BoP follows the Double Entry System to record transactions with the rest of the world and has two sides \u2013 Credit side and Debit side.<\/li>\n\n\n\n
          • Accounts in the BoP includes\n
              \n
            1. Current account<\/li>\n\n\n\n
            2. Capital account<\/li>\n<\/ol>\n<\/li>\n<\/ul>\n\n\n
              \n
              \"Balance<\/figure>\n<\/div>\n\n\n
              Current Account<\/strong><\/h6>\n\n\n\n
                \n
              • It is the record of trade in goods and services and transfer payments.<\/li>\n\n\n\n
              • It records all the transactions that relate to the actual receipts and payments of the visible items, invisible items, and unilateral transfers during a specific period of time.<\/li>\n\n\n\n
              • Components of Current Account includes\n
                  \n
                1. Trade in goods<\/strong> (Visible Trade or Merchandise Transactions<\/strong>) <\/strong>\u2013 It includes exports and imports of goods.<\/li>\n\n\n\n
                2. Trade in services<\/strong> <\/em>(Invisible Trade)<\/strong>\u00a0\u2013 It includes factor income and non-factor income transactions.\n
                    \n
                  • Factor income<\/strong> \u2013 Includes net international earnings on factors of production (like labour, land and capital).<\/li>\n\n\n\n
                  • Non-factor income<\/strong> \u2013 It is net sale of service products like shipping, banking, tourism, software services, etc.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                  • Transfer payments<\/strong> \u2013 They are the receipts which the residents get for free without having to provide any goods or services in return. They consist of gifts, remittances and grants.<\/li>\n\n\n\n
                  • Income receipts and payments to and from abroad \u2013 <\/strong>It involves investment income in the form of rent, profits, and interest.<\/li>\n<\/ol>\n<\/li>\n<\/ul>\n\n\n
                    \n
                    \"Current<\/figure>\n<\/div>\n\n\n
                    Capital Account<\/strong><\/h6>\n\n\n\n
                      \n
                    • It includes those transactions, which cause a change in the assets or liabilities of a country\u2019s residents or its government.<\/li>\n\n\n\n
                    • Components of Capital Account includes\n
                        \n
                      1. Borrowings and Lendings to and from abroad<\/strong> \u2013 Includes all the transactions related to borrowings from abroad by the government, private sector, etc.<\/li>\n\n\n\n
                      2. Investments to and from abroad<\/strong>\u00a0\u2013 Includes all the investments by the rest of the world in shares of Indian companies, real estate, etc. The investments to and from abroad are:\n
                          \n
                        • Foreign Direct Investment<\/strong> \u2013 FDI consists of the purchase of an asset, which gives direct control to the buyer over the asset. For example, purchase of land, building, etc.<\/li>\n\n\n\n
                        • Portfolio Investment<\/strong> \u2013 It is the cross-border transactions and positions involving equity or debt securities, other than direct investment or reserve assets. Ex \u2013 FII (Foreign Institutional Investment).<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                        • Change in Foreign Exchange Reserves<\/strong> \u2013 The financial assets of the government held in the central bank are Foreign Exchange Reserves.<\/li>\n<\/ol>\n<\/li>\n<\/ul>\n\n\n
                          \n
                          \"Capital<\/figure>\n<\/div>","protected":false},"excerpt":{"rendered":"

                          Select the correct answer using the code given below. Answer: (c) 1 and 3 Balance of Payments (BOP): Current Account Capital Account<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[59],"class_list":["post-1975","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-59"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":59,"label":"2014"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1975","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1975"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1975\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1975"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1975"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1975"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1975"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}