Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
To record the import and export of goods and services
B
To track financial transactions that affect ownership of assets
C
To monitor the flow of remittances
D
To account for government grants and loans
Understanding the Answer
Let's break down why this is correct
Answer
The primary purpose of the capital account in the balance of payments is to track the movement of money for investments and financial transactions between a country and the rest of the world. It records how much money is flowing in and out due to things like foreign investments, loans, and the buying and selling of assets. For example, if a country invests in a factory overseas, that investment will show as an outflow in the capital account. This helps governments and economists understand how much foreign investment is coming in and how much domestic money is being invested abroad, which can influence economic policy. Overall, the capital account is essential for assessing a country's financial health and its relationships with other countries.
Detailed Explanation
The capital account tracks money that changes ownership of assets. Other options are incorrect because Some might think the capital account records goods and services; People may confuse remittances with capital transactions.
Key Concepts
capital account
Topic
Balance of Payments Adjustments
Difficulty
easy level question
Cognitive Level
understand
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