Balance of payments on the Current account includes:

• A. Goods and services plus net international transfers and factor income.
• B. Only goods and services.
• C. Net capital inflows.
• D. The capital account balance.

Answer: (A)

The current account in the balance of payments tracks flows that relate to a country’s production and income: the trade in goods and services, plus earnings from abroad (factor income) and unilateral transfers (net international transfers such as remittances and aid). So it includes goods and services along with these income and transfers components. Net capital inflows are recorded in the financial account, not the current account, and the capital account balance is a separate section altogether. That’s why the option combining goods and services with net international transfers and factor income best fits what the current account measures.