Read the following statements - Assertion (A) and Reason (R):
Assertion (A): Import of machinery will be recorded in current account.
Reason (R): All the imports and exports of goods are recorded in current account of Balance of Payments.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 1
Option 1: Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
Explanation:
- Assertion (A) states that import of machinery will be recorded in the current account. This is true because the current account of the balance of payments records transactions involving goods, services, income, and current transfers. Import of machinery falls under the category of goods, and therefore it is recorded in the current account.
- Reason (R) states that all imports and exports of goods are recorded in the current account of the balance of payments. This is true as well. Reason (R) explains Assertion (A) because it provides a broader context and justification for why import of machinery, as mentioned in Assertion (A), is recorded in the current account.