Solution
Option 1 -> This is incorrect as BOP records international transactions, not domestic ones.
Option 2 -> This is too narrow; BOP records transactions with all countries (rest of the world), not just between two countries.
Option 3 -> This correctly defines BOP as it records all economic transactions between a country's residents and the rest of the world.
Option 4 -> This is incorrect as BOP includes goods, services, financial flows, and transfers, not just goods.
Hence, Option 3: Economic transactions between residents of a country and rest of the world -> Balance of Payments (BOP) is a comprehensive statistical statement that systematically records all economic transactions between residents of a country and the rest of the world during a specific period (usually a year or quarter). It includes the current account (trade in goods and services, income, and transfers), capital account, and financial account (investments, loans). This makes it a complete record of international economic activity, not limited to specific countries or only goods. -> correct