ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A when the government adopts a deflationary macroeconomic policy
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B when the government devalues the currency
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C when the prices of imported products that are demand-inelastic increase significantly
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D when tariffs are placed on imported products that are demand-elastic
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Detailed explanation-1: -The Democratic Republic of the Congo ran a trade surplus in 2013, as we learned in the beginning of the chapter. Yet its current account balance was –$2.8 billion.
Detailed explanation-2: -India had a favourable balance of trade only in 1972-72 (Rs. 104 Crore) and 1976-77 (Rs. 68 crore) . These two financial years are the only two financial years in the history of Post independence India, in which we had a favorable trade balance.
Detailed explanation-3: -Ans. The transactions involving export and import of goods, i.e. only the visible items of economic transactions, determine the Balance of Trade. Balance of Trade is in surplus, when the value of export of goods are more than the value of import of goods.
Detailed explanation-4: -A balance of payments deficit means the nation imports more commodities, capital and services than it exports. It must take from other nations to pay for their imports.