Item Included ill Accumulation Capital Transaction Account

The incoming stream into accumulation i.e. capital transaction account comes from two directions (a) depreciation coming from production and (b) saving coming from transactions. These are the incomings. As for the outgoings; we may notice three types: . domestic investment which is made up of expenditure on fixed assets (minus sales of existing assets) and investment in stocks. Then there arc foreign investments, i.e., the net increase in the country’s claims against other countries of the world. After deducting depreciation from domestic investment, we get net domestic investment which means net addition to the country’s tangible wealth. By adding to it foreign investments, we can get the addition made to the country’s wealth at home and abroad. In addition to the two outgoings mentioned above. there is the third, viz., capital transfers abroad. After deducting similar transfers received from abroad they are shown net .

Rest of tile World: Balance of Payment Account

Let us now bring in ‘rest of the world’ and see the balance of payment account of a country with respect  to the totality of the other countries of the world.We have to take notice of the mixture of income flows and transfer flows and current and capital transactions. The total income of country consists of the income derived from production, from transfers abroad both current (net) and capital’ (net) and borrowings from abroad. Against these, we set off the total outgoings consisting of imports and incomes from productive activity.

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