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Question
Distinguish between 'autonomous' and accommodating' Balance of Payments transactions.
Solution
| Autonomous transaction | Accommodating transaction |
| An autonomous transaction is shown as an item in the balance of payment (BOP). It refers to international economic transactions which are made independently of the state of the BOP, such as profit motive. |
An accommodating transaction is shown as an item in the BOP. It refers to international economic transactions which are not made with the profit motive such as government financing |
| It is also known as 'above the line items' in BOP. | It is also known as 'below the line items' in BOP |
| It is independent of the BOP condition of an economy. | It is dependent on the BOP condition of an economy because compensating short-term capital transactions are undertaken to correct the disequilibrium in the autonomous items |
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