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Economics (CUET) Balance of Payments

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A deficit in ……….. can be covered by the surplus in ………….. , while the reverse cannot be done

BOP, BOT

current account, capital account

BOT,BOP

capital account, current account

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Explanation:

- Let’s break down the options:

- BOP (Balance of Payments) includes both the current account (trade in goods, services, income and current transfers) and the capital account (financial transactions).

- BOT (Balance of Trade) is just the difference between a country’s exports and imports of goods.

- A deficit in the current account (imports > exports, services, remittances, etc.) can be covered by a surplus in the capital account (inflows of investments, loans, etc.), but not vice versa.

- Covering a BOT deficit with a BOP surplus doesn’t make sense as BOT is just a part of BOP.

- Option 4 is correct: “A deficit in capital account cannot be covered by surplus in current account, but the reverse is possible.”

- Correct answer: Option 2 – current account, capital account