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Balance of Payments

2 Board Economics previous year questions on Balance of Payments — options free on every question; 1 include the answer & explanation free, the rest unlock with PYQ Pass.

Q1 FREE PREVIEW

Read the following statements: Assertion (A) and Reason (R).
Choose the correct option from those given below:

Assertion (A): Unilateral transfers are recorded in the Current Account of the Balance of Payments (BoP) of a nation.

Reason (R): Capital account records transactions which cause a change in the assets or liabilities of the country.

a

Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

b

Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

c

Assertion (A) is true, but Reason (R) is false.

d

Assertion (A) is false, but Reason (R) is true.

✓ Correct answer: b)

Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

Explanation

(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

Explanation:
  • Unilateral transfers such as gifts and remittances are included in the Current Account because they are one-sided transfers.
  • Capital account records transactions involving foreign assets and liabilities.
  • However, Reason (R) does not explain why unilateral transfers are included in the current account.
Q2

From the following, identify the situation which indicates the Current Account Surplus (CAS) in Balance of Payments (BOP) account of a nation.

a

Excess of receipts on current account over the payments on current account.

b

Equality of receipts on current account and payments on current account.

c

Excess of payments on current account over receipts on current account.

d

Excess of payments on current account over receipts on capital account.

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