Question

In the context of Balance of Payments accounting, which of the following transactions is/are NOT recorded under the Current Account?

• A. Merchandise trade
• B. Unilateral transfer payments
• C. Purchase of international financial assets
• D. Purchase of foreign currency by the central bank

Hint:

Current account = goods, services, income, transfers. Financial/capital account = cross-border asset trades \& official reserves.

Answer 1

The Correct Option is C, D

Step 1: What the Current Account contains. It records trade in goods and services, primary income (interest, profits, wages), and secondary income/transfers. Hence (A) merchandise trade and (B) unilateral transfers {are} current-account items.
Step 2: What is not in the Current Account. Acquisitions of financial assets/liabilities—like buying foreign bonds, equities, deposits—are part of the financial (capital) account. Likewise, official reserve transactions (central bank purchasing foreign currency) are recorded under the financial account/official reserves. Therefore (C) and (D) are not current-account items.
Final Answer: (C), (D)