A nation's capital and ﬁnancial account

Question

Quizplus · Accepted Answer

A nation's capital and financial account includes both inflows of money (e.g. foreign investment, foreign loans) and outflows of money (e.g. domestic investment abroad, repayment of foreign loans). This account also includes net investment income (income earned by domestic residents from foreign assets minus income paid to foreign residents for domestic assets) and net transfers (foreign aid, remittances, etc.). Option A is incorrect as it only considers inflows and ignores outflows. Option B is incorrect as it only includes service exports and imports and ignores other components such as foreign direct investment. Option D is also incorrect as it ignores the in- and outflows of capital and only focuses on income and transfers.

A Nation's Capital and ﬁNancial Account