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Question
'Deficit' in Balance of payment (BOP) refers to the excess of ______.
Options
Current account payments over Current account receipts.
Capital account payments over Capital account receipts.
Autonomous payments over Autonomous receipts.
Accommodating payments over Accommodating receipt.
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Solution
'Deficit' in Balance of payment (BOP) refers to the excess of autonomous payments over autonomous receipts.
Explanation:
- The status of the Balance of Payment (BOP), that is, whether it is in surplus or deficit, is determined by taking into account autonomous transactions (both current and capital).
- To compensate the deficit caused by autonomous transactions, accommodating transactions are carried out after considering the condition of the Balance of Payment (BOP).
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