Assertion Reason MCQs of Balance of Payments Class 12
Looking for Assertion Reason Based MCQs (Multiple Choice Questions) with answers of Balance of Payments chapter of Macroeconomics class 12 CBSE, ISC and other state Board.
We have made a collection of very important Assertion Reason based questions with answers of chapter Balance of Payments class 12 Macroeconomics
Assertion Reason Multiple Choice Questions of Balance of Payments chapter of Economics Class 12
Let’s Practice
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): External assistance is recorded in the capital account of the Balance of Payments.
Reason (R): External assistance is recorded in the current account of the Balance of Payments.
Alternatives:
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.
Ans – c)
Explanation:- External assistance comes under the borrowing raised from foreign countries and financial institutions.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Increased lending to abroad is recorded on the debit side of the capital account.
Reason (R): Lending affects the assets and liabilities of the economy and involves the outflow of income.
Alternatives:
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.
Ans – a)
The lending to abroad results outflow of foreign currency that also increases the financial assets of a country. Those foreign transactions that affects the coutries financial assets comes in capital account
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): When there is a trade deficit and current account deficit, there will always be a BoP deficit.
Reason (R): When there is a trade deficit and current account deficit but a capital account surplus (i.e., a net capital inflow), there may be Balanced BoP or BoP Surplus.
Alternatives:
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.
Ans – d)
Explanation:- BoP Deficit, surplus and Balance BoP is the result of final balance of current and capital account both. If current account is deficit but capital account is in enough surplus to cover the deficit of current account. The BoP may be in surplus or a Balance BoP.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Export and Import of machines are recorded in the capital account of the balance of payments account.
Reason (R): Export and import of machines is the export and import of goods. Therefore, it is recorded in the current account of the Balance of Payments account.
Alternatives:
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.
Ans – d)
Explanation:- All transactions related to physical goods whether it is a physical assets recorded in the Balance of trade that comes under the current account of BoP. Capital account of BoP only records those foreign transactions that only changes the finanical assets and liabilities of a country. Physical assets transactions are not recorded in Capital Account. It is the part of current account.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Purchase of second-hand machinery from abroad is not recorded in the current account of the balance of payment.
Reason (R): The sale and purchase of second-hand goods from abroad are included in the current account of BoP.
Alternatives:
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.
Ans – d)
Explanation:- Purchase of second hand machinery is the new one for a country. Thus it is recorded in the Balance of Payments account as it results in the outflow of foreign exchange. The sale
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Foreign investments are recorded in the capital account of the balance of payments.
Reason (R): Foreign investments, e.g., foreign direct investments are the international transactions of assets during a fiscal year. Therefore, foreign investments are recorded in the capital account of the balance of payments.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): The difference between the value of exports and imports of goods and services is called trade balance.
Reason (R): Trade balance is the difference between the value of exports of goods and imports of goods only. It does not include exports and imports of services.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): All transactions recorded in Balance of Payment are autonomous transactions.
Reason (R): Autonomous transactions are recorded in both the current and capital accounts of the BOP.
Alternatives:
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.
Ans – d)
There are two types of transactions in BoP. One is autonomous and second is accommodating transactions. The autonomous transactions are recorded in both the current and capital account. But accomodating transactions are recorded only in capital account.
Read Here:- What are autonomous transactions class 12
Read Here:- What are accomodating transactions class 12
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): In the balance of payments, repayment of loans by the Indian government to the US Government will be recorded on the credit side of the current account.
Reason (R): It will be recorded in the capital account since a loan from US Government is an international liability. The repayment of loans results in an outflow of foreign exchange. Therefore, it will be recorded on the debit side.
Alternatives:
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.
And – d)
Explanation:- Outflow of foreign exchange is recorded at debit side.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Accommodating transactions are undertaken to make equilibrium in the BoP account.
Reason (R): Accommodating items are also called above-the-line items.
Alternatives:
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.
Ans – c)
Explanation:- Accommodating items are below the line items.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Profits received from investments abroad are recorded in the capital account.
Reason (R): Profits received from investments abroad is recorded in the current account since it is an investment income (factor income). Factor income includes net international earning of factors of production. It will be recorded on the credit side of the current account since it leads to the inflow of foreign exchange.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Balance of Payments is the accounting record of economic transactions only.
Reason (R): Surplus balance of payments is an indicator of excess outflows over inflows of foreign trade.
Alternatives:
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.
Ans -d)
Explanation:- BoP is the accounting statement that records the foreign exchange transaction of Economic nature.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Borrowing and lending money in the international money market is a part of the capital account in BoP.
Reason (R): Borrowing and lending money in the international money market is a part of the current account in BoP.
Alternatives:
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.
Ans – c)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Purchase of shares of a foreign company are included in the credit side of the capital account.
Reason (R): It is recorded on the debit side of the capital account of BoP as there will be an outflow of foreign exchange.
Alternatives:
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.
Ans – d)
Explanation:- Outflow of foreign exchange due to purchaing of financial assets is recorded at the debit side of capital account.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Purchase of Machinery from the rest of the world is an economic transaction of the current account of BoP.
Reason (R): Any transaction that impacts the financial and real state assets and financial liabilities of a country is recorded on the capital account of BoP.
Alternatives:
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.
Ans – b)
Explanation:- Both Assertion are Reason are true. But Reason does not explain the Assertion.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Current Account Deficit is financed entirely by selling assets or by borrowing abroad, the country is said to be in Balance of Payments equilibrium.
Reason (R): Current Account Deficit is financed entirely by a capital account surplus, that is, a net capital inflow without any official reserve sale. So, Current account + Capital Account = 0. Hence, the country is said to be a Balance of Payments equilibrium.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): A country always tries to balance the BoP, i.e. balance in the current account equals to balance in the capital account.
Reason (R): Balanced BoP indicates stable economic relations with the rest of the world.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): When there is a trade deficit and current account deficit, there will always be a BoP deficit.
Reason (R): When there is a trade deficit and current account deficit but a capital account surplus (i.e., a net capital inflow), there may be Balanced BoP or Bop surplus.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Import of machines is recorded in the current account.
Reason (R): All imports and exports of goods are recorded in the current account because it is simply the import/export of goods.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): A country with a trade deficit can not have a current account surplus in its Balance of Payment.
Reason (R): Current Account Surplus (CAS) in this situation may arise when there is a surplus on account of Invisibles and this surplus exceeds the trade deficit.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Capital of balance of payment is non-recurring in nature.
Reason (R): Capital transactions of BoP affect the assets and liabilities of a country. Such Transactions does no incur frequently.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Deficit in the current account indicates a deficit in the balance of payments also.
Reason (R): Deficit in the current account may be compensated by the surplus in the capital account resulting in BoP surplus.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): ‘Foreign investment in India’ will be recorded on the credit side of the Capital account in the Balance of Payment account.
Reason (R): ‘Foreign investment in India’ is of a capital nature. It leads to an inflow of foreign currency of the country.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Import of machinery is reflected in the current account of the balance of payments
Reason (R): Export and import of goods and Invisibles are recorded in the current account of the balance of payments.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): current account in Balance of Payments records only the exports and imports of goods and services.
Reason (R): Current Account of Balance of Payments records invisible items along with exports and imports of goods and services.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Autonomous items cause movements of goods and services across the borders.
Reason (R): Accommodating items cause to clear the deficit or surplus in the Balance of Payment.
Alternatives:
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.
Ans – b)
Explanation:- Explanation:- Autonomous items refers to those Balance of Payment (BoP) transactions that are undertaken for profit.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Current account is a part of the Balance of Trade.
Reason (R): Current account records exports and imports of goods and services and transfer payments.
Alternatives:
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.
Ans – d)
Ans – d)
Explanation:-Balance of Trade is a part of the current account. Balance on current account = Trade balance + Invisibles balance.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Balance of Trade includes only Merchandise Transactions.
Reason (R): Unfavourable Balance of Payments can be met out of favorable Balance of Trade.
Alternatives:
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.
Ans – c)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Current Account Surplus indicates a net outflow of foreign exchange.
Reason (R): Current Account Surplus arises when the value of exports of goods and services is more than the value of imports of goods and services.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Borrowings from abroad are recorded in the capital account of the Balance of Payments on the debit side.
Reason (R): Borrowings from abroad are recorded in the Capital Account of Balance of Payments on the credit side as it results in an inflow of foreign currency in the economy.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Autonomous transactions are independent of the state of the BOP account.
Reason (R): Autonomous items are also known as above-the-line items.
Alternatives:
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.
Ans – b)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Current Account transactions bring a change in the current level of a country’s income.
Reason (R): Current Account includes all items expressing changes in stock.
Alternatives:
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.
Ans – c)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): A country may face a situation of current account deficit, even if the country has a trade surplus, with greater negative balances on account of services and unilateral transfers.
Reason (R): Trade Deficit must exist if a country is facing a situation of Current Account Deficit.
Alternatives:
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.
Ans – c)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): A country always tries to balance the Bop, i.e., balance in the current account equals to balance in the capital account.
Reason (R): Balanced BoP indicates stable economic relations with the rest of the world.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Trade deficit is always a great cause of worry for an economy.
Reason (R): Trade deficit is a lesser cause of worry if it reflects a rise in investment which will build the capital stock and increase the future output in an economy.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Rent received by an Indian real estate company from Google in New York would be recorded on the credit side of the capital account.
Reason (R): Capital account of BoP records all those transactions, between residents of a country and the rest of the world, which causes a change in the Financial and real assets or liabilities of the residents of the country or its government.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): ‘Indians Investing in assets abroad’ will be recorded under the debit side of the capital account in Balance of Payments.
Reason (R): Indians investing in assets abroad will lead to an outflow of foreign currency. It will be recorded under the debit side of the capital account in the balance of payments.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): If an Indian buys a UK Car Company, it enters into a capital account as a debit item.
Reason (R): The sale of assets like the sale of shares of an Indian company to a Chinese customer is a credit item in the capital account.
Alternatives:
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.
Ans – b)
Explanation:- Purchasing of share of a foreign company results in outflow of foreign exchange and will be recorded at the debit side of capital account. When foreign company purchases the shares of an Indian company. It results in inflow of foreign exchange and recorded at credit side of Capital account. Purchasing and selling the shares results in the change of financial assets of a country thus a transactions of a capital nature.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): ‘Demand for domestic goods and services and ‘Domestic demand for goods and services are one and the same thing.
Reason (R): The demand for domestic goods and services is the sum total of demand for goods and services by both the domestic and foreign countries; whereas, domestic demand for goods and services is the sum total of domestic demand for domestic as well as foreign goods.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Computer hardware will be included in visible exports.
Reason (R): Services are included in invisible exports
Alternatives:
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.
Ans – b)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): A country with trade deficit can not have current account surplus in its Balance of Payments.
Reason (R): Trade deficit occurs when value of goods/visibles imported is more than the value of goods/visibles exported. Current Account Surplus in this situation will arise when the deficit on trade account is less than the surplus on account of invisibles.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Balance of Payments Account is always balance
Reason (R): Autonomous transactions restore balance in the Balance of Payments Account.
Alternatives:
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.
Ans – d)
Explanation:- Balance of Payments account is always Balanced. Accommodating transactions are used to balane of payemnts through capital account.
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Profits received from investments abroad on the credit side of the current account of Balance of Payments.
Reason (R): It is recorded in the current account since it is an investment income (factor income). It will be recorded on the credit side of the current account since it leads to the inflow of foreign exchange.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Purchase of Machinery from Germany will be recorded on the debit side of the balance of payment.
Reason (R): Any transaction that causes a country to lose foreign exchange is recorded on the debit side and thus given a negative sign.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): ‘Make in India’ Programme will have favourable effect on the Balance of Payments position of India.
Reason (R): ‘Make in India’ will increase supply (inflow) of foreign exchange in India, causing improvement in the balance of payments position.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Current account transactions bring a change in the capital stock of a country
Reason (R): ‘Make in India’ will increase the inflow of foreign exchange.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): ‘Import of Pulses’ will have favourable effect on the Balance of Payments position of India.
Reason (R): Import of pulses will lead to an outflow of foreign exchange from the country, causing an adverse effect on the balance of payment position.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): The export of sugar is recorded in the capital account.
Reason (R): ‘Atmanirbhar Bharat’ will decrease the outflow of foreign exchange.
Alternatives:
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.
Ans – d)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): An increase in foreign income improves the trade balance.
Reason (R): An increase in foreign income leads to increased exports. Thus, the trade balance (=exports of goods – imports of goods) increases.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): India’s current account balance recorded a surplus of US$ 19.8 billion (3.9% of GDP) in Q1 of 2020-21
Reason (R): There has been a steeper decline in merchandise imports relative to exports in past few years.
Alternatives:
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.
Ans – a)
Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Trade balance is the difference between the value of exports of goods and imports of goods only. It does not include exports and imports of services.
Reason (R): The difference between the value of exports and imports of goods and services is called the trade balance.
Alternatives:
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.
Ans – c)
