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      Question

      Which is correct about Balance of Payment (BO

      • P ? i. It shows all economic transactions between the residents of the country and the rest of the world. ii. The transactions are recorded over a definite period of time. iii. This includes transaction made by government, corporations but excludes that of by individuals iv. In case of BOP crisis Foreign Exchange Reserve will deplete.
      A Only i and ii Correct Answer Incorrect Answer
      B Only i, ii and iii Correct Answer Incorrect Answer
      C Only i, iii and iv Correct Answer Incorrect Answer
      D Only i, ii and iv Correct Answer Incorrect Answer
      E All of the above Correct Answer Incorrect Answer

      Solution

      The balance of payments, also known as balance of international payments of a country is the record of all economic transactions between the residents of the country and the rest of the world in a particular period (over a quarter of a year or more commonly over a year). These transactions are made by individuals, firms and government bodies. A BoP crisis, also called a currency crisis, occurs when a nation is unable to pay for essential imports or service its debt repayments. Typically, this is accompanied by a rapid decline in the value of the affected nation's currency. This could lead to a situation where nation's government will exhaust its foreign reserves trying to support the value of the domestic currency.

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