Question

Distinguish between balance of current account and balance of capital account.

Give two differences between Current Account and Capital Account of Balance of Payment Account.

State the relationship between balance of current account and balance of capital account.

Answer 1

Points	balance of current account	balance of capital account
1. Meaning	Transfers, invisibles, and visibles make up the current account balance.	The balance of capital transfers, including borrowing and lending from overseas as well as the buying and selling of assets, gold, and foreign exchange from other nations, is referred to as the balance of capital accounts.
2. Nature of Transactions	Includes visible, invisible, and unilateral transfers.	Includes investments, loans, and borrowings.
3. Affect on Nation’s Income	Directly affects national income.	Affects national assets and liabilities, not income directly.
4. Time Frame	Deals with short-term transactions.	Deals with long-term capital movement.
5. Example:	Export of goods, import of services, remittances.	FDI, foreign loans, and portfolio investment.