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Capital Account Transactions

A capital account transaction refers to a transaction that involves the movement of capital between countries, typically involving assets and investments that have long-term benefits or ownership interests.

Examples of capital account transactions include:

  1. Foreign direct investment (FDI): Investment in a foreign country with the aim of establishing a lasting interest or influence in a foreign enterprise.
  2. Portfolio investment: Investment in foreign stocks, bonds, and other financial instruments.
  3. Acquisition or sale of fixed assets: The purchase or sale of a company’s assets, such as land, buildings, or machinery.
  4. Loans and borrowings: Borrowing or lending money from a foreign entity.
  5. Transfer of ownership of intellectual property rights: The sale or licensing of patents, copyrights, and other forms of intellectual property rights to a foreign entity.

Capital account transactions are usually regulated by the government, and restrictions may be imposed on such transactions in certain circumstances. These transactions can have a significant impact on the balance of payments and the overall economic growth of a country.

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