Correct Option
The Capital Account of a country's Balance of Payments (BoP) records all international transactions that involve a change in the ownership of financial assets and liabilities. These transactions affect the stock of foreign assets and liabilities of a country. The items listed in options 1, 2, and 4 correctly fall under the Capital Account:
- Foreign Loans: These represent borrowings from non-residents by residents or the government, leading to a change in financial liabilities.
- Foreign Direct Investment (FDI): This involves cross-border investment in which an investor establishes a lasting interest in an enterprise in another economy. It represents a change in ownership of assets.
- Portfolio Investment: This includes equity and debt securities (like shares, bonds, debentures) purchased by foreign investors. It represents financial claims and liabilities.
Incorrect Options
Option 3, Private Remittances, refers to unrequited transfers of income from abroad by individuals. These are part of the Current Account, specifically categorized under 'invisibles' or 'unrequited transfers', as they do not create any future claims or liabilities. Therefore, any option including Private Remittances (1, 2 & 3; 2, 3 & 4; 1, 3 & 4) is incorrect.