Which of the following international transactions are meant to bridge the gap in BOP.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Accommodating transactions.
Accommodating transactions (also called BOP balancing transactions) are those international transactions that are carried out to correct or bridge the Balance of Payments (BOP) deficit or surplus.
These include:
-
Borrowings from IMF
-
Drawing down foreign exchange reserves
-
Receiving foreign aid to cover a deficit
-
Official capital flows
Such transactions are not made for profit or economic motives, but rather to manage imbalances in the BOP.