What constitues the capital account and in the context of usd/inr how does price fluctuation change the quantity and the imports/ export ?
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Current account consists of the following four accounts:
Merchandise trade: All commodities and manufactured goods bought, sold, or given
away. Net export of goods = export – import of goods
Services include tourism, transportation, engineering, and business services such as
legal services, management consulting, and accounting. Fees related to patents on
new technology, software, books, and movies are also considered as a current
account.
Net export of services = export – import of services.
Income receipts: Income derived from ownership of assets, such as dividend and
interest payments, and income from foreign investments.
Net income receipts = Investment income on foreign assets owned by nationals –
Payments on domestic assets owned by foreign nationals.
Unilateral transfers of assets: One-way transfer of assets such as remittances from
nationals working abroad (private transfers), gifts from foreign countries, foreign aid,etc.
Capital account
Capital transfers: Debt forgiveness, migrants’ transfers (goods and service belonging to migrants as they leave the country), gift and inheritance taxes, etc.
Sales and purchases of non-produced, non-financial assets: Rights to natural
resources, and the sale and purchase of intangible assets such as patents, copyrights, etc.
Note: Patents related to the services sector go in the current account, the rest is accounted in the capital account. For example, selling the rights to exploration is a capital account.
Financial account
Financial assets abroad that include official reserve assets, government assets, and
private assets. These include gold, foreign currencies, foreign securities, the country’s reserve in the IMF, and direct foreign investment.
Foreign-owned financial assets in the domestic country that include official assets
and other foreign assets.