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Question
Distinguish between current account and capital account
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Solution
Current account and capital account
| Current account | Capital account |
| Current account transactions bring a change in the current level of economy’s income. |
Capital transactions bring a change in the capital stock of an economy |
| It is a flow of concept as it includes all items of flow nature. |
It is a stock concept as it includes all items expressing changes in stock |
| Current account = visible trade + invisible trade + unilateral transfers + income receipts and payments |
Capital account = Borrowings and lendings to and from abroad + investments to and from abroad + change in foreign exchange reserves. |
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