The account showing financial transactions like stocks and bonds is the:

Question

BlackTom AI · Accepted Answer

The capital account (often grouped with the financial account in BOP textbooks) records cross‑border purchases and sales of financial assets such as stocks, bonds, and direct investment.

1) Relevant concepts:
- Balance of Payments (BOP): a country’s record of all transactions with the rest of the world, composed of the current account and the capital/financial account.
- Current account: records trade in goods and services, primary income (wages, investment income) and secondary income (transfers).
- Capital/financial account: records capital transfers and transactions in financial assets — portfolio investment (stocks, bonds), foreign direct investment, and changes in reserves.
- Trade balance: exports minus imports of goods; a subcomponent of the current account.

2) Step‑by‑step reasoning:
- Stocks and bonds are financial assets, so any cross‑border purchase or sale changes ownership of financial assets.
- The BOP line that captures these changes is the capital/financial account, not the current account or trade balance.
- Thus an inward purchase of domestic bonds by a foreigner appears as a financial inflow (credit) in the capital account; an outflow when residents buy foreign stocks is recorded as a debit in the capital account.

3) Example with intermediate steps:
- Suppose residents of Country A buy $50 million of foreign bonds. Record: capital account (portfolio outflow) = −$50 million.
- If Country A simultaneously runs a current account deficit of $50 million, the capital account inflow/outflow entries and reserve changes will offset so BOP balances.

4) Why the correct answer is correct:
- Because stocks and bonds are financial assets, their cross‑border transactions belong to the capital/financial account of the BOP.

5) Why other options are incorrect:
- a. Current account: covers goods, services, income and transfers — not portfolio asset purchases.
- b. Trade balance: only merchandise export/import difference, not financial transactions.
- c. Balance of payments: the overall statement (includes capital account) but not the specific account that directly records stocks and bonds.

Conclusion: The capital account is the correct choice, confirming answer d. capital account.

The account showing financial transactions like stocks and bonds is the:Single choice

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The account showing financial transactions like stocks and bonds is the:Single choice

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When an Australian exporter sells software to France and uses the proceeds to buy stock in a French company, Australian exports _____ and there is a capital _____ to/from Australia.[Fill in the blank]

When an Australian oil company purchases oil from Singapore and the Singaporean firm uses the proceeds from its sale of oil to Australia to buy Australian government debt, Australian _____ and there is a capital _____ to/from Australia.[Fill in the blank]

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