Which of the following best describes the balance of payments?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → A record of transactions in goods, services and assets between residents of a country and the rest of the world for a specified period
The balance of payments covers every kind of transaction with the rest of the world: goods, services and assets. The other options each describe only one part of it.
Option (1) The difference between the value of exports and imports of goods — Incorrect. This is the balance of trade.
Option (2) A record of transactions in goods, services and assets between residents of a country and the rest of the world for a specified period — Correct. It covers all transactions, usually for a year.
Option (3) A record of trade in goods and services and transfer payments — Incorrect. This is the current account.
Option (4) A record of all international transactions of assets — Incorrect. This is the capital account.
NCERT (2026-27): “6.1 The Balance of Payments The balance of payments (BoP) record the transactions in goods, services and assets between residents of a country with the rest of the world for a specified time period typically a year. There are two main accounts in the BoP — the current account and the capital account …” “6.1.1 Current Account Current Account is the record of trade in goods and services and transfer payments. …” “6.1.2 Capital Account Capital Account records all international transactions of assets. …” |