ECONOMICS
BALANCE OF PAYMENTS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Credit side
|
|
|
Debit side
|
|
|
Either A or B
|
|
|
None of the above
|
Detailed explanation-1: -It is recorded as negative items in the Current Account of the BOP, as it results in an outflow of the foreign exchange from the country.
Detailed explanation-2: -Capital transferred out of a country for the purpose of investing in a foreign country is recorded as a debit in either of these two accounts. Specifically, if it’s a portfolio investment, it’s recorded as a debit in the financial account. If it’s a direct investment, it’s recorded as a debit in the capital account.
Detailed explanation-3: -A change in reserves serves as the financing item in India’s BOP. So, any withdrawal from the reserves is recorded on the positive (credit) side and any addition to these reserves is recorded on the negative (debit) side of the capital account.
Detailed explanation-4: -The current account records imports and exports, as well as transfer payments.
Detailed explanation-5: -It is recorded on the debit side because it leads to outflow of foreign exchange.