Commerce Exam > Commerce Questions > A deficit in BOP occursa)When autonomous fore...
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A deficit in BOP occurs
- a)When autonomous foreign exchange payments equals autonomous foreign exchange receipts
- b)When autonomous foreign exchange payments is less than autonomous foreign exchange receipts
- c)When autonomous foreign exchange payments is in negative deficit
- d)When autonomous foreign exchange payments exceeds autonomous foreign exchange receipts
Correct answer is option 'D'. Can you explain this answer?
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A deficit in BOP occursa)When autonomous foreign exchange payments equ...
Balance Of Payment (BOP) is a statement which records all the monetary transactions made between residents of a country and the rest of the world during any given period. ... On the other hand, BOP deficit indicates that a country's imports are more than its exports.
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A deficit in BOP occursa)When autonomous foreign exchange payments equ...
To understand the concept of a deficit in BOP (Balance of Payments), we need to know the meaning of autonomous foreign exchange payments and autonomous foreign exchange receipts.
Autonomous Foreign Exchange Payments:
These are the payments made by a country for imports of goods and services, investment abroad, and other international transactions that are not influenced by the level of national income or the exchange rate. They are determined by factors such as government policies, consumer preferences, and business decisions.
Autonomous Foreign Exchange Receipts:
These are the receipts earned by a country from exports of goods and services, investment inflows, and other international transactions that are not influenced by the level of national income or the exchange rate. They are determined by factors such as foreign demand, global market conditions, and investment opportunities.
Now, let's analyze the given options to determine which one represents a deficit in BOP.
Option A: When autonomous foreign exchange payments equals autonomous foreign exchange receipts.
- This option describes a situation where the payments and receipts are equal. It does not indicate a deficit, as there is no excess of payments over receipts.
Option B: When autonomous foreign exchange payments is less than autonomous foreign exchange receipts.
- This option describes a situation where the payments are less than the receipts. It does not represent a deficit but rather a surplus in BOP.
Option C: When autonomous foreign exchange payments is in negative deficit.
- This option is not a correct representation of the concept. A negative deficit would mean a surplus, not a deficit.
Option D: When autonomous foreign exchange payments exceeds autonomous foreign exchange receipts.
- This option accurately represents a deficit in BOP. When the payments exceed the receipts, it indicates a deficit as there is an imbalance between the outflows and inflows of foreign exchange.
Conclusion:
Based on the analysis, option D is the correct answer. A deficit in BOP occurs when autonomous foreign exchange payments exceed autonomous foreign exchange receipts.
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A deficit in BOP occursa)When autonomous foreign exchange payments equals autonomous foreign exchange receiptsb)When autonomous foreign exchange payments is less than autonomous foreign exchange receiptsc)When autonomous foreign exchange payments is in negative deficitd)When autonomous foreign exchange payments exceeds autonomous foreign exchange receiptsCorrect answer is option 'D'. Can you explain this answer?
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