Capital Account Components

The Capital Account of the Balance of Payments records all transactions involving changes in asset ownership. Statement 1 is correct: Foreign Loans are part of the Capital Account as they represent financial inflows/outflows. Statement 2 is correct: Foreign Direct Investment (FDI), which involves ownership and control of assets abroad, is a major component of the Capital Account. Statement 3 is incorrect: Private Remittances belong to the Current Account, not the Capital Account; they are transfers of income by residents working abroad to their families. Statement 4 is correct: Portfolio Investment, which includes purchases of stocks, bonds, and other securities, is part of the Capital Account. The Capital Account comprises FDI, foreign loans, portfolio investments, and changes in foreign exchange reserves. > Capital Account: FDI, Foreign Loans, Portfolio Investment compose it; Remittances belong to Current Account. Answer: (b).