Assertion (A): Purchase of a factory in the USA by an Indian company is a debit in India's capital account.
Reason (R): It sends foreign exchange out of India in return for a foreign asset.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Outward investment is a payment abroad, so it is a debit. R explains A.

Concept: Outward FDI
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe capital account

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Ten questions from Balance of Payments, at your own pace.

Practise this chapter →

Ten questions from Balance of Payments, at your own pace.

Practise this chapter All 53 questions in Balance of Payments Revise the notes for Balance of Payments

Assertion (A): Purchase of a factory in the USA by an Indian company is a debit in India's capital account.Reason (R): It sends foreign exchange out of India in return for a foreign asset.

Explanation

Assertion (A): Purchase of a factory in the USA by an Indian company is a debit in India's capital account.
Reason (R): It sends foreign exchange out of India in return for a foreign asset.