Assertion Reason: Balance of Payment

1.Assertion (A): Balance of Trade (BOT) includes exports and imports of goods only. Reason (R): BOT is a part of balance of payment (BOP).

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D)Assertion (A) is false but Reason (R) is true.

... Answer is B)

2.Assertion (A): Trade surplus occurs when exports are greater than imports. Reason (R): Balance of trade is a part of capital account.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is C)

3.Assertion (A): NRI deposits recorded in the credit side of current accounts of BOP. Reason (R): NRI sending money to family members are recorded in the credit side of current account of BOP.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is D)

4.Assertion (A): Balance of payment is always balance when accomodating items are reflected as a part of capital account. Reason (R): Accomodating items are meant to restore a balance in BOP accounts.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is A)

5.Assertion (A): Money sent by NRIs to their relatives is to be recorded in current account of BOP. Reason (R): Exports of machinery is to be recorded in the current account of BOP.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is B)

6.Assertion (A): Demonstration effect is also cause of disequilibrium of deficit of BOP. Reason (R): Due to demonstration effect, there will be outflow of the money to the abroad from the economy.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is A)

7.Assertion (A):In a state of BOP equilibrium, there is increase in official reserves with the central bank of the country. Reason (R): Loans taken from IMF are included in the capital account of BOP.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is D)

8.Assertion (A):There may be surplus, deficit or balanced of balance of trade. Reason (R): Balance of payment is always balance in accounting sense.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is B)

9.Assertion (A): "borrowing from abroad" is recorded in the credit side of capital accounts of BOP. Reason (R): "Borrowings from abroad" leads to the receipt of foreign exchange from rest of the world.

A)Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is A)

10.Assertion (A): The alternative name of balance of trade is balance of visible trade or trade balances. Reason (R): Sending gift to the abroad is a part of balance of trade.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is C)

11.Assertion (A): Balance of trade does not record capital account transaction. Reason (R): Expenditure by the tourists is included in balance of trade.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is C)

12.Assertion (A): Autonomous item of BOP refer to international economic tranaction that take place due to some economic motive such as profit maximisation. Reason (R): Autonomous items are independent of the state of the country's BOP.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is B)

13. Assertion (A): Export and import of goods is treated as visible trade. Reason (R): Goods are tangible and therefore, can be seen while crossing the borders.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is A)

14.Assertion (A): Capital in balance of payment is recurring in nature. Reason (R): Capital transfers affect the asset and liabilities of a country.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is B)

15.Assertion (A): Balance of payments records trasactions related to goods as well services. Reason (R): Current account balance includes the balance of trade as well as balance on invisibles.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is B)

16.Assertion (A): Accommodating transactions are undertaken to make equilibrium in BOP account. Reason (R): Accommodating transaction are also known as below the line items of BOP.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is B)

17.Assertion (A): When balance of trade is in deficit, the balance of payment is not in deficit. Reason (R): Balance of trade is only a part of BOP accounts.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is A)

18.Assertion (A): purchase of second hand Machinery from abroad is not recorded in the BOP. Reason (R): Sale and purchase of second hand goods are not included in the estimation of national income.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is D)

19.Assertion (A): Capital account transactions do not give rise to future claims. Reason (R): Capital account transactions reveal borrowings from rest of the world.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is D)

20.Assertion (A): Lending abroad is recorded in the debit side of current account. Reason (R): Lending affects the assets and liabilities of the economy as there is outflow of income.

A) Both assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true but Reason (R) is false.
D) Assertion (A) is false but Reason (R) is true.

... Answer is A)