In the balance of payment mechanism above the line transactions are also known as:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Autonomous transactions.
Most international transactions are made for their own sake: a firm exports to earn a profit, a family imports what it needs, an investor buys shares abroad. None of them is made with the balance of payments in mind, so they take place independently of the state of the BoP. These are autonomous transactions, and they are entered first, ‘above the line’.
Their balance decides the result: the BoP is in surplus or deficit according as autonomous receipts are greater or less than autonomous payments. The transactions made afterwards to settle that gap are the ones entered below the line.
Why the other options are incorrect
Option (1) Errors and omissions. — Incorrect. Errors and omissions is the balancing item that reflects the failure to record all international transactions accurately. It is not a type of transaction made for its own sake, so it is not an above-the-line item.
Option (2) Official reserve transactions. — Incorrect. The central bank buys or sells foreign exchange reserves to cover a deficit or a surplus. These are made to bridge the gap in the BoP, so they are the accommodating item, below the line.
Option (3) Accommodating transactions. — Incorrect. Accommodating transactions are determined by the gap left by the autonomous transactions. They are termed ‘below the line’ items, the opposite of autonomous ones.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 23-05 S2 | 14-05 S1* | – | – | – |
* A similar question.
NCERT (2025-26): “Autonomous and Accommodating Transactions … International economic transactions are called autonomous when transactions are made due to some reason other than to bridge the gap in the balance of payments, that is, when they are independent of the state of BoP. One reason could be to earn profit. These items are called ‘above the line’ items in the BoP. The balance of payments is said to be in surplus (deficit) if autonomous receipts are greater (less) than autonomous payments. Accommodating transactions (termed ‘below the line’ items), on the other hand, are determined by the gap in the balance of payments, that is, whether there is a deficit or surplus in the balance of payments. In other words, they are determined by the net consequences of the autonomous transactions. Since the official reserve transactions are made to bridge the gap in the BoP, they are seen as the accommodating item in the BoP (all others being autonomous).” |