Capital Flows and the FX Market: practice question
Which of the following transactions is recorded in the current account of a country's balance of payments?
- A foreign tourist pays for a week's lodging at a hotel in Maravia
- A resident of Maravia buys shares of an overseas electronics company
- A foreign automaker builds an assembly plant in Maravia
Show answer and explanation
Correct answer: A
Explanation: A foreign visitor's spending on domestic lodging is an export of services, which is a current account item. B is portfolio investment and C is foreign direct investment; both are acquisitions of cross-border financial or real assets and are recorded in the financial account, not the current account.
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