Current vs. Capital Account in Balance of Payments

Steps:

• Recall current account includes trade in goods/services, primary income (wages, interest, profits), and secondary income (transfers).
• Examine options: A involves service trade; B and C are income flows; D is an asset transaction.
• Classify: Income and trade items fit current account; asset purchases fit financial account.
• Confirm: Only D represents capital movement, not current flows.

Why D is correct:

• Purchase of foreign assets records as a capital outflow in the financial account per IMF balance of payments manual, not current account income or trade.

Why the others are wrong:

• A: Exports of services are part of the goods and services balance in the current account.
• B: Interest on foreign loans is primary income received in the current account.
• C: Profits from foreign investments are primary income repatriated to the current account.

Final answer: D