Macro

Balance of Payments

Medium

Which of the following is a component of the capital account?

Export of merchandise.

Remittances received from Japan.

Purchase of IT services from the USA.

Purchase of shares of a foreign company by an Indian resident.

✅ Correct Option: 4

Option 1 -> Export of merchandise is part of the current account as it represents trade in goods.

Option 2 -> Remittances received from Japan fall under current account transfers.

Option 3 -> Purchase of IT services from the USA is recorded in the current account under trade in services.

Option 4 -> Purchase of shares of a foreign company by an Indian resident is a capital account transaction.

Hence, Option 4: Purchase of shares of a foreign company by an Indian resident -> The capital account (or financial account) records transactions involving financial assets and liabilities between residents and non-residents. When an Indian resident purchases shares of a foreign company, it represents an outflow of capital for portfolio investment abroad. This is a capital/financial account transaction, while exports, imports of services, and remittances are all current account items -> correct

2025: 30 May Shift 2

In modern economies, countries interact through various channels, Which market is not an example of these linkages?

2026: 11 May Shift 1

Calculate the current account balance from the following values (given in dollars):

Exports of goods =188

Import of goods =248

Net invisibles;

A. Non-factor services=56

B. Transfers=36

C. Income receipts =10

2025: 22 May Shift 1

For example, there is an increase in international travel by Indians. What will be the effect on the domestic currency?

(A). Demand curve shifts upward and right to the original demand curve.

(B). Demand for foreign goods and services increases.

(C). Depreciation of domestic currency (rupees) in terms of foreign currency (dollars).

(D). The value of rupees in terms of dollars has fallen and value of dollar in terms of rupees has risen.

Choose the correct answer from the options given below:

2026: 23 May Shift 1

Which one of the following is the major advantage of flexible exchange rate system?

2026: 13 May Shift 1

The difference between the value of exports and the value of imports of goods of a country in a given period of time is called?

2026: 13 May Shift 1

Arrange the following steps in correct order with respect to change in exchange rate:

(A) Demand for foreign goods and services increases.

(B) It leads to a shift in the demand curve upward.

(D) The value of currency will fall in respect of foreign currency.

Choose the correct answer from the options given below:

Which of the following is a component of the capital account?

Solution

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