The capital/financial account records what?

• A. Net cross-border financial asset and liability flows
• B. Net exports
• C. Government budget balance
• D. GDP growth rate

Answer: (A)

The main idea is that the capital/financial account records net cross-border financial asset and liability flows. It tracks how money moves between countries through ownership of financial assets and liabilities—what foreigners own in a country and what residents own abroad—including stocks, bonds, direct investments, loans, and changes in official reserves. This part of the balance of payments shows how a country finances its current account position: a current account deficit is typically financed by net inflows in the financial account. Net exports belong to the current account, not the capital/financial account; the government budget balance relates to fiscal policy; and GDP growth measures production, not cross-border financial transactions.