What is a major characteristic of a capital account?

• A. Records international trade balances
• B. Records cross-border investments
• C. Calculates current account surplus
• D. Tracks exchange rate impacts

Answer: (B)

The capital account primarily records cross-border investments, reflecting transactions that involve the acquisition of assets and liabilities between residents and non-residents. This includes both direct investment, such as purchasing a business or property, and portfolio investments, such as buying stocks and bonds in foreign markets. The capital account is essential in understanding the financial flows that influence a country's economy, as it indicates how much investment is coming in versus how much is going out.

The other options, while related to international finance, do not accurately describe the capital account. For instance, the record of international trade balances pertains to the current account, which focuses on tangible goods and services rather than financial assets. Calculating the current account surplus is also linked to the current account, which measures the balance of trade, net income, and direct transfers. Lastly, tracking exchange rate impacts is a broader topic that relates to overall currency movements and their effects on trade and investment but is not specific to the characteristics of the capital account itself.