Which of the following statements are correct?
(A) Autonomous transactions are independent of the state of the balance of payments.
(B) Accommodating transactions are termed ‘above the line’ items in the BoP.
(C) The balance of payments is in deficit if autonomous receipts are less than autonomous payments.
(D) Official reserve transactions are seen as an autonomous item in the BoP.
(E) Accommodating transactions are determined by the net consequences of the autonomous transactions.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (C) and (E) only
Autonomous transactions are made for their own sake, such as profit. Accommodating transactions only fill the gap they leave.
(A) Autonomous transactions are independent of the state of the balance of payments. — Correct. They are made for reasons other than bridging the BoP gap.
(B) Accommodating transactions are termed ‘above the line’ items in the BoP. — Incorrect. Autonomous items are above the line; accommodating items are below the line.
(C) The balance of payments is in deficit if autonomous receipts are less than autonomous payments. — Correct. When autonomous payments are more than autonomous receipts, the gap is a BoP deficit.
(D) Official reserve transactions are seen as an autonomous item in the BoP. — Incorrect. They are made to bridge the gap, so they are the accommodating item.
(E) Accommodating transactions are determined by the net consequences of the autonomous transactions. — Correct. They respond to the deficit or surplus that autonomous transactions create.
NCERT (2026-27): “Autonomous and Accommodating Transactions 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. Accommodating transactions (termed ‘below the line’ items), on the other hand, are determined by the gap in the balance of payments, that is, whether there is a deficit or surplus in the balance of payments. In other words, they are determined by the net consequences of the autonomous transactions. Since the official reserve transactions are made to bridge the gap in the BoP, they are seen as the accommodating item in the BoP (all others being autonomous).” |