Match List-I with List-II:
| List-I | List-II | ||
|---|---|---|---|
| (A) | Current account deficit | (I) | Reflect the difficulty of recording all international transactions accurately |
| (B) | Official reserve sale | (II) | Termed ‘below the line’ items |
| (C) | Errors and omissions | (III) | Must be financed by a capital account surplus |
| (D) | Accommodating transactions | (IV) | The reserve bank sells foreign exchange when there is a deficit |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A) - (III), (B) - (IV), (C) - (I), (D) - (II)
| List-I | List-II | Reason |
|---|---|---|
| (A) Current account deficit | (III) Must be financed by a capital account surplus | A country spending more abroad than it earns must sell assets or borrow abroad. |
| (B) Official reserve sale | (IV) The reserve bank sells foreign exchange when there is a deficit | The reserve bank uses its reserves to cover the gap. |
| (C) Errors and omissions | (I) Reflect the difficulty of recording all international transactions accurately | This is the third element of the BoP for transactions not recorded accurately. |
| (D) Accommodating transactions | (II) Termed ‘below the line’ items | They are made to bridge the gap in the BoP. |
NCERT (2026-27): “6.1.3 Balance of Payments Surplus and Deficit … Thus, any current account deficit must be financed by a capital account surplus, that is, a net capital inflow.” “… Alternatively, the country could use its reserves of foreign exchange in order to balance any deficit in its balance of payments. The reserve bank sells foreign exchange when there is a deficit. This is called official reserve sale. …” “Autonomous and Accommodating Transactions … 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. …” “Errors and Omissions It is difficult to record all international transactions accurately. Thus, we have a third element of BoP (apart from the current and capital accounts) called errors and omissions which reflects this. …” |