Correct Option
The Current Account of the Balance of Payments records transactions that do not result in a change in the ownership of financial assets and liabilities between residents and non-residents. It primarily includes:
- Balance of Trade: This component measures the net value of exports and imports of goods (merchandise).
- Balance of Invisibles: This encompasses services (e.g., shipping, banking, tourism, software services), unilateral transfers (e.g., remittances, gifts), and income (e.g., interest, dividends, profits).
These components represent current income and expenditure flows during a specific period.
Incorrect Options
- Foreign assets: These transactions are recorded in the Capital Account or Financial Account. The Capital Account tracks all international transactions that involve a change in the ownership of financial assets and liabilities, such as foreign direct investment (FDI), foreign portfolio investment (FPI), and external commercial borrowings.
- Special Drawing Rights (SDRs): SDRs are an international reserve asset created by the International Monetary Fund (IMF). They are not a currency but represent a potential claim on the freely usable currencies of IMF members. Transactions involving SDRs are recorded in the Capital Account or the Reserve Account of the Balance of Payments, as they represent changes in official reserve assets, not current income or expenditure flows.