Concept of Balance of Payments - Balance of Payments Surplus and Deficit

Assertion (A): The Balance of payments is in surplus, if autonomous receipts are greater than autonomous payments.

Reason (R): Autonomous transactions are determined by the difference in the Balance of Payments.

Suppose C = 100 + 0.75Y D, I = 500, G = 750, taxes are 20 per cent of income, X = 150, M = 100 + 0.2Y. Calculate equilibrium income, the budget deficit or surplus and the trade deficit or surplus.

‘Current account deficit in an economy must be financed by a corresponding capital account surplus’.

Do you agree with the given statement? Give valid reason(s) in support of your answer.

Distinguish between Autonomous transactions and Accommodating transactions. 

What are official reserve transactions? Explain their importance in the balance of payments.

Suppose, Country X, has more inflation than Country Y. Which of the following is most likely situation to happen in such a case, assuming other factors being constant?

In the above example, if exports change to X = 100, find the change in equilibrium income and the net export balance.

Why is the open economy autonomous expenditure multiplier smaller than the closed economy one?