(a) Define Balance of Payments (BoP) Account. (b) Differentiate between autonomous transactions and accommodating transactions in Balance of Payments (BoP).

Question

Accepted Answer

(a) **Balance of Payments (BoP) Account:** An accounting statement that provides a systematic record of all economic transactions between residents of a country and the rest of the world in a given period of time. It includes visible items, invisible items, unilateral transfers, and capital transfers.

(b) **Difference between Autonomous and Accommodating Transactions:**

| Basis | Autonomous | Accommodating |
|-------|-------------|---------------|
| **Meaning** | Transactions due to economic motive like profit | Transactions to cover deficit/surplus in autonomous items |
| **Effect on BOP** | Independent of BOP state | Undertaken to maintain BOP balance |
| **Account** | Both current and capital accounts | Only capital account |
| **Alternate Name** | Above the line items | Below the line items |
| **Example** | Merchandise exports, FDI | Drawing foreign exchange reserves |