What does the Balance of Payments (BOP) record?

The Balance of Payments (BOP) is a comprehensive accounting framework that captures all economic transactions between residents of a country and the rest of the world over a specified period. This includes various types of transactions, such as trade in goods and services, investment flows, and financial transfers.

When considering the relationship with the rest of the world, the BOP encompasses not just government interactions but also private sector dealings, as well as all economic activities involving international stakeholders. This broad scope allows for an understanding of how a nation interacts economically on a global scale, thereby highlighting surplus or deficit situations in different accounts.

This comprehensive nature is why the correct answer emphasizes transactions between an economy and the rest of the world. The other options are limited in scope; some focus solely on government actions, while others restrict the consideration to private sector or domestic investment transactions, missing the larger picture of international economic activity.