With reference to Balance of Payments, which of the following constitutes/constitute the Current Account? 1. Balance of trade 2. Foreign assets 3. Balance of invisibles 4. Special Drawing Right Select the correct answer using the code given below.
Explanation
Balance of Trade: This refers to the net difference between a country's exports and imports of goods. It's a key component of the current account.
Foreign Assets: This refers to assets held by a country's residents outside the country. It's not part of the current account but might be included in the capital account.
Balance of Invisibles: This captures the net income from services, such as tourism, transportation, and royalties, as well as net current transfers (e.g., foreign aid). It's another crucial component of the current account.
Special Drawing Right (SDR): This is an international reserve asset created by the International Monetary Fund (IMF). It's not directly part of the current account but might be included in the reserve assets.
Therefore, only options 1 (Balance of Trade) and 3 (Balance of Invisibles) are constituents of the Current Account in the Balance of Payments.