Which of the following is incorrect in the context of International Trade?

Balance of payments records the volume of goods and services imported as well as exported by a country to other countries.

The correct answer is Option 1: Balance of payments records the volume of goods and services imported as well as exported by a country to other countries.

Option 1: “Balance of payments records the volume of goods and services imported as well as exported by a country to other countries.” — Incorrect. This is the definition of Balance of Trade and not Balance of Payments. Balance of Payments records the monetary value of all economic transactions with other countries, not merely the “volume” of goods and service.

NCERT: "Balance of trade records the volume of goods and services imported as well as exported by a country to other countries. If the value of imports is more than the value of a country’s exports, the country has negative or unfavourable balance of trade. If the value of exports is more than the value of imports, then the country has a positive or favourable balance of trade. Balance of trade and balance of payments have serious implications for a country’s economy. A negative balance would mean that the country spends more on buying goods than it can earn by selling its goods. This would ultimately lead to exhaustion of its financial reserves"