Question

Which of the following correctly describes unilateral transfers in the current account?

Options

• Exports and imports of physical goods between countries

• One-way payments with no return, such as gifts, remittances, grants, and donations

• Payments for tourism, banking, insurance, and transportation services

• Earnings of wages, profits, interest, and rent from abroad

Answer 1

Unilateral transfers are one-way payments with no return. Examples include gifts, remittances, grants, and donations. Because nothing of economic value flows back in exchange, they differ fundamentally from trade in goods and services or factor income.