Balance of Payments of an economy records.

Option 1 -> This refers to government budget, not Balance of Payments.

Option 2 -> BoP records all transactions with rest of the world, not just government funds.

Option 3 -> This only covers visible items (goods) but BoP includes invisibles (services, transfers) and capital flows too.

Option 4 -> BoP is a systematic record of all foreign exchange transactions (inflows and outflows) including trade, services, income, transfers, and capital movements.

Hence, Option 4: Inflow/outflow of foreign exchange to/from the economy -> Balance of Payments is a comprehensive statement that records all economic transactions between residents of a country and the rest of the world during a given period. It captures all foreign exchange inflows (receipts) and outflows (payments) arising from exports, imports, services, income transfers, and capital transactions. It has two main accounts: Current Account (trade, services, income, transfers) and Capital & Financial Account (investments, loans). -> correct