The items on the capital account of Balance of Payments are:

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UGC NET Paper 2: Economics 24th Nov 2021 Shift 1
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  1. Flow variables
  2. Stock variables
  3. Changes in stock magnitudes
  4. Both Stock and Flow variables

Answer (Detailed Solution Below)

Option 1 : Flow variables
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UGC NET Paper 1: Held on 21st August 2024 Shift 1
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The correct answer is Flow variables

Key Points

  • BOP is a flow concept as it is measured over (during) a period of time.
  • Since BOP is measured over a time interval, it can be said that they have an element of time attached to them. Similarly, current account is also a flow variable. 

Important Points

  • The term ‘balance of payments is the’ sum or aggregate of its current account and capital account.
  • Current account and capital account will always move in the opposite directions.
  • A deficit on current account will always meet with a matching surplus on capital account, and conversely a surplus on current account will match with a deficit on current account. And in the ultimate analysis, an economy’s BOP will be in balance i.e., there will be no deficits and surpluses in aggregate.
  • The capital account also includes the flow of taxes, purchase and sale of fixed assets etc., by migrants moving out/into a different country. The deficit or surplus in the current account is managed through the finance from the capital account and vice versa.
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