ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Autonomous items
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Accommodating items
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Both a and b
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Neither a nor b
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Detailed explanation-1: -Autonomous items cause an imbalance in the BoP, and accommodating items correct these imbalances.
Detailed explanation-2: -Causes of BoP Deficit High outflow of foreign exchange to meet import demands like technology, machines, and equipment can lead to BoP deficit. Sustained rise in a country’s prices can often make foreign products cheaper, leading to a high volume of imports. Unstable tax structures, change in government, etc.
Detailed explanation-3: -Autonomous items refer to those international economic transactions, which take place due to some economic motive such as profit maximization. These items are also known as ‘above the line items’. Autonomous transactions are independent of the state of BOP account.
Detailed explanation-4: -(a) Autonomous items in BOP: These refer to international economic transactions that take place due to some economic motives like earning income and profit maximisation. They have nothing to do with foreign exchange payments.
Detailed explanation-5: -On the capital account, receipts and repayments of long-term loans by private individuals are autonomous transactions. Surplus or Deficit in BOP: BOP account is in surplus when autonomous receipts are more than the autonomous payments.