Assertion : Disequilibrium results when net balance of BOP is positive or negative.
Reason : Disequilibrium is caused by economic, political and social factors.
Answer & explanation
Correct answer: option 2
The correct answer is option 2: Both assertion and reason are true and reason is the not correct explanation
Assertion: Disequilibrium results when net balance of BOP is positive or negative. This statement is true. A balance of payments (BoP) disequilibrium occurs when there is an imbalance between a country's total payments and receipts. This imbalance can be either a surplus (positive) or deficit (negative).
Reason: Disequilibrium is caused by economic, political, and social factors. This statement is also true. Economic factors (like trade imbalances, inflation, interest rates), political factors (like trade policies, government regulations), and social factors (like consumer preferences, demographics) can all contribute to BoP disequilibrium.
However, while both statements are true, the reason does not directly explain the assertion. The reason provides the causes of disequilibrium, while the assertion simply states the condition for disequilibrium.