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 flow of money in and out of a country related to investments and loans. This account records transactions like foreign investments in domestic businesses and loans given to or received from other countries. For example, if a company in your country builds a factory in another country, this investment will show up as an outflow in the capital account. Understanding these flows helps governments and economists see how much money is being invested or borrowed internationally, which can affect the economy. Overall, the capital account is crucial for understanding a country's financial relationships with the rest of the world.
Detailed Explanation
The capital account tracks money that changes ownership of assets. Other options are incorrect because Some might think this account records goods and services; People might confuse remittances with capital flows.
Key Concepts
capital account
Topic
Balance of Payments Adjustments
Difficulty
easy level question
Cognitive Level
understand
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