Practicing Success
If autonomous receipts are less than autonomous payments, the balance of payments of an economy will be _____________. |
In surplus In equilibrium In deficit Zero |
In deficit |
The correct answer is option (3) : In deficit 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. |