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Which of the following is NOT a component of the current account?

easy MCQ 1 mark Class 12 · Economics · Open Economy Macroeconomics
  1. Trade in goods
  2. Trade in services
  3. Foreign direct investment
  4. Net transfer receipts
Answer
Foreign direct investment

The correct answer is Foreign direct investment — Recognise that foreign direct investment appears in the capital account, not the current account.

Step-by-step solution

  1. Identify the components of the current account: trade in goods, trade in services, net income, and net transfers.
  2. Recognise that foreign direct investment appears in the capital account, not the current account.
Common mistake: Confusing the capital account with the current account

Concept tested: Components of current account

Published · How this solution was prepared and checked

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