QUESTION

Medium

Economy

Prelims 2014

With reference to Balance of Payments, which of the following constitutes/constitute the Current Account?

  1. Balance of trade
  2. Foreign assets
  3. Balance of invisibles
  4. Special Drawing Right

Select the correct answer using the code given below.

Select an option to attempt

Explanation

Balance of Trade (1) This refers to the net difference between a country's exports and imports of goods. It's a key component of the current account.

Foreign Assets (2) This refers to assets held by a country's residents outside the country. It's not part of the current account but might be included in the capital account.

Balance of Invisibles (3) This captures the net income from services, such as tourism, transportation, and royalties, as well as net current transfers (e.g., foreign aid). It's another crucial component of the current account.

Special Drawing Right (SDR) (4) This is an international reserve asset created by the International Monetary Fund (IMF). It's not directly part of the current account but might be included in the reserve assets.

Therefore, only options 1 (Balance of Trade) and 3 (Balance of Invisibles) are constituents of the Current Account in the Balance of Payments.

Trusted by 2L aspirants

Practice UPSC Prelims PYQs Smarter

Practice Now
  • Track accuracy & weak areas
  • See past trends & repeated themes
Start Practicing Now

Crack UPSC with your
Personal AI Mentor

An AI-powered ecosystem to learn, practice, and evaluate with discipline

SuperKalam is your personal mentor for UPSC preparation, guiding you at every step of the exam journey.

Download the App

Follow us

ⓒ Snapstack Technologies Private Limited