Classifying Primary vs. Secondary Income in Current Account

Steps:

• Define primary income as earnings from investments, such as profits, dividends, and interest from abroad.
• Define secondary income as unilateral transfers without direct compensation, like government aid and workers' remittances.
• Match examples to definitions: profits earned abroad fit primary; government transfers fit secondary.
• Select the option aligning profits with primary and transfers with secondary.

Why C is correct:

• Primary income includes investment returns like profits earned abroad (IMF Balance of Payments Manual, Section 6); secondary income covers transfers like government aid (Section 7).

Why the others are wrong:

• A: Reverses categories; government transfers are secondary, not primary.
• B: Both profits and dividends are primary investment income.
• D: Workers' remittances are secondary transfers, not primary.

Final answer: C