Question

Which one of the following is not a component of capital account in balance of payments?

• A. Foreign debt
• B. Foreign investment
• C. Foreign remittances
• D. Foreign aid

Hint:

Foreign remittances are a part of the current account, not the capital account.

Answer 1

The Correct Option is C

Step 1: Understand the balance of payments.
The balance of payments (BoP) records all economic transactions between the residents of a country and the rest of the world. It is divided into two main accounts: the current account and the capital account.
Step 2: Capital account components.
The capital account includes transactions related to foreign investment, foreign debt, and foreign aid, which involve capital flows into and out of a country.
Step 3: Foreign remittances.
Foreign remittances, however, are recorded in the current account, as they are payments made by individuals working abroad to their home countries, and not capital flows.
Step 4: Conclusion.
Thus, the correct answer is (C) Foreign remittances. Final Answer: \[ \boxed{\text{Foreign remittances}} \]