Class 12 Economics Important Chapter 8 Balance of Payments

Class 12 Economics Important Chapter 8 Balance of Payments Solutions English Medium As Per The New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 12 Economics Important Solutions in English and select need one. AHSEC Class 12 Economics Additional Notes Download PDF. HS 2nd Year Economics Additional Solutions.

Class 12 Economics Important Chapter 8 Balance of Payments

Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. ASSEB Class 12 Economics Additional Question Answer are part of All Subject Solutions. Here we have given HS 2nd Year Economics Important Solutions English Medium for All Chapters, You can practice these here.

Balance of Payments

Chapter: 8

PART – A: INTRODUCTORY MICROECONOMICS

IMPORTANT QUESTION AND ANSWER

Short Questions answers:

1. What is the Balance of Payments (BoP)?

Ans: A systematic record of all economic transactions in goods, services and assets between residents of a country and the rest of the world for a given period (usually a financial year).

2. Why do governments maintain a BoP account?

Ans: To monitor the international position of trade and capital flows and to frame monetary, fiscal, and trade policies.

3. Is BoP a stock or a flow concept?

Ans: Flow concept.

4. What are “visible items” in BoP?

Ans: Physical goods that cross customs borders (trade in goods).

5. Give two examples of “invisible items.”

Ans: Shipping services and tourism (also banking, insurance, software).

6. What are unilateral transfers?

Ans: One-sided receipts/payments like gifts, remittances, grants, scholarships, war indemnities.

7. Name the two broad accounts of BoP.

Ans: Current Account and Capital Account.

8. What is the Balance of Trade (BoT)?

Ans: Exports minus imports of goods (visible items) over a period.

9. What constitutes factor income under invisibles?

Ans: Interest, dividend, profit, rent, compensation of employees.

10. Define direct investment.

Ans: Cross-border asset purchase that confers control (e.g., acquiring a firm/real asset abroad).

11. Define portfolio investment.

Ans: Cross-border purchase of securities (shares/bonds) without managerial control.

12. How is a Current Account Deficit (CAD) financed?

Ans: By capital inflows—borrowing abroad, selling domestic assets to foreigners—or by drawing down official reserves.

13. What are autonomous items?

Ans: International transactions motivated by economic considerations (e.g., profits/returns), recorded above the line.

14. What are accommodating items?

Ans: Transactions undertaken to balance the BoP (e.g., use of reserves, IMF borrowing); recorded below the line.

15. In accounting terms, does BoP always balance?

Ans: Yes, credits equal debits under double-entry bookkeeping.