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Question
'Deficit' in Balance of payment (BOP) refers to the excess of ______.
Options
Current account payments over Current account receipts.
Capital account payments over Capital account receipts.
Autonomous payments over Autonomous receipts.
Accommodating payments over Accommodating receipt.
Solution
'Deficit' in Balance of payment (BOP) refers to the excess of autonomous payments over autonomous receipts.
Explanation:
- The status of the Balance of Payment (BOP), that is, whether it is in surplus or deficit, is determined by taking into account autonomous transactions (both current and capital).
- To compensate the deficit caused by autonomous transactions, accommodating transactions are carried out after considering the condition of the Balance of Payment (BOP).
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