What does the capital account record?

What does the capital account record?

• A. International capital transactions related to monetary policy and central banks
• B. Current account transactions
• C. Investments in business, real estate, bonds and stocks
• D. Transactions related to ownership of financial derivatives

Answer: (C)

The capital account records cross-border changes in ownership of real and financial assets. Investments in a business, in real estate, and in financial instruments like bonds and stocks are exactly the kinds of capital movements that move ownership across borders, so they belong in this part of the balance of payments. The other options don’t fit because central bank actions relate to monetary policy and reserve management, the current account covers trade in goods and services and income, and ownership of derivatives is usually counted under the broader financial account rather than the capital account.

The capital account records cross-border changes in ownership of real and financial assets. Investments in a business, in real estate, and in financial instruments like bonds and stocks are exactly the kinds of capital movements that move ownership across borders, so they belong in this part of the balance of payments. The other options don’t fit because central bank actions relate to monetary policy and reserve management, the current account covers trade in goods and services and income, and ownership of derivatives is usually counted under the broader financial account rather than the capital account.