Question

Name two accounts of balance of payments.

Answer 1

1. Current Account: The current account documents all foreign economic transactions involving the export and import of products, services, unilateral transfers, and overseas revenues. Thus, the current account balance is calculated by subtracting the value of exports from the value of imports after adjusting for overseas income and net transfers. Current account transactions are of a flow type.
2. Capital Account: The capital account tracks all foreign economic transactions involving the change of assets, both financial and physical. It is a record of short- and long-term capital transactions, both private and public. Capital account operations alter the capital stock of the country. Most of them are stock.