Match the items of List I with the items of List-II and choose the correct answer: List-I List-II a. Balance of trade 1. Imports and exports of goods and services and unilateral transfer of goods and services b. Current account 2. Transactions leading to changes in the financial assets and liabilities of a country c. Balance of payments 3. All economic transactions between a country’s residents and residents of other countries d. Capital account 4. Value of exports and imports of a country

The correct answer is: C. a-1, b-2, c-3, d-4

• Balance of trade is the value of a country’s exports minus the value of its imports.
• Current account is the sum of the balance of trade, net income from abroad, and net unilateral transfers.
• Balance of payments is the record of all economic transactions between a country’s residents and residents of other countries.
• Capital account is the record of transactions leading to changes in the financial assets and liabilities of a country.

Here is a more detailed explanation of each item:

• Balance of trade is the value of a country’s exports minus the value of its imports. A country has a trade surplus if its exports are greater than its imports, and a trade deficit if its imports are greater than its exports.
• Current account is the sum of the balance of trade, net income from abroad, and net unilateral transfers. Net income from abroad is the difference between the income that a country’s residents earn from abroad and the income that foreigners earn in the country. Net unilateral transfers are transfers of money or goods from one country to another that are not made in return for goods or services.
• Balance of payments is the record of all economic transactions between a country’s residents and residents of other countries. It includes the current account, the capital account, and the financial account. The financial account records changes in the ownership of financial assets, such as stocks, bonds, and bank deposits.
• Capital account is the record of transactions leading to changes in the financial assets and liabilities of a country. It includes transactions such as the purchase and sale of foreign assets, the borrowing and lending of money, and the investment of foreign direct investment.