Which of the following is NOT correct?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → When the BoP is balanced, the reserve change is greater than zero.
When the BoP is balanced, the deficit is fully covered by lending, so there is no reserve movement: the reserve change is zero.
Option (1) When the BoP is balanced, the overall balance is zero. — True. A balanced BoP has a balance of zero.
Option (2) When the BoP is in surplus, the overall balance is greater than zero. — True. A surplus means the balance is above zero.
Option (3) When the BoP is in deficit, the overall balance is less than zero. — True. A deficit means the balance is below zero.
Option (4) When the BoP is balanced, the reserve change is greater than zero. — False. With a balanced BoP the reserve change is zero.
NCERT (2026-27): “6.1.3 Balance of Payments Surplus and Deficit … In this case, in which a country is said to be in balance of payments equilibrium, the current account deficit is financed entirely by international lending without any reserve movements. …”
|
