The Capital Account records:

The Capital Account records:

• A. The overall balance of payments across all categories.
• B. The difference between exports and imports.
• C. Net changes in a country's international financial assets and liabilities.
• D. Only the inflows of foreign direct investment.

Answer: (C)

The capital account shows how a country’s financial position with the rest of the world changes as residents and nonresidents buy and sell financial assets and borrow or lend. It records net changes in international financial assets and liabilities, including things like foreign direct investment, portfolio investments, loans, and reserve assets. This broad scope explains why it’s the best fit: it isn’t limited to a single type of flow or to trade alone, but to the overall stock shifts in financial claims between residents and nonresidents. The other options describe the overall balance of payments, the trade balance (current account), or only a specific inflow, which don’t capture the full concept.

The capital account shows how a country’s financial position with the rest of the world changes as residents and nonresidents buy and sell financial assets and borrow or lend. It records net changes in international financial assets and liabilities, including things like foreign direct investment, portfolio investments, loans, and reserve assets. This broad scope explains why it’s the best fit: it isn’t limited to a single type of flow or to trade alone, but to the overall stock shifts in financial claims between residents and nonresidents. The other options describe the overall balance of payments, the trade balance (current account), or only a specific inflow, which don’t capture the full concept.