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Question
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.
Options
Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
Assertion (A) is true, but Reason (R) is false.
Assertion (A) is false, but Reason (R) is true.
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Solution
Assertion (A) is true, but Reason (R) is false.
Explanation:
Surplus in BOP occurs when Autonomous Receipts (both current and capital) exceed Autonomous Payments (both current and capital). The difference in BOP determines which transactions can be accommodated. These are done on purpose by the RBI after determining whether the BOP is in deficit or surplus.
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