Question:
What is the balance of the Capital Account for this economy? (Current Account balance items: Goods & Services -160, Primary Income -40, Secondary Income +20. Financial Account items sum to +150)
(1) Rs. 30 billion surplus
(2) Rs. 30 billion deficit
(3) Rs. 150 billion deficit
(4) Rs. 150 billion surplus
(5) Rs. 180 billion deficit
Correct Answer:
(1)
Answer Explanation:
Current Account Balance = -160 – 40 + 20 = -180. The Net Borrowing required from the Financial Account is 150. Since Current Account + Capital Account = Net Lending/Borrowing (which matches the Financial Account), -180 + Capital Account = -150. Therefore, the Capital Account must have a surplus of +30.
Topic: Balance of Payments Year: 2023
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