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CUET Economics 2025 PYQs13 May Shift 1. Free, no login required.

Macro

past year questions, CUET Economics 2025 13 May Shift 1

Balance of Payments

past year questions, Macro, CUET Economics 2025 13 May Shift 1

Medium

Suppose an Indian manufacturer of steel acquires a steel manufacturing unit in Europe. This type of transactions are recorded in which of the following.

Solution

✅ Correct Option: 2

Option 1 -> Current Account records trade in goods, services, income, and current transfers, not capital investments.

Option 2 -> Capital Account records capital transfers and foreign direct investments (FDI), including acquisition of foreign assets.

Option 3 -> Capital Market is a financial market for trading securities, not a component of balance of payments.

Option 4 -> Net Invisibles refers to invisible trade like services and transfers in current account, not asset acquisition.

Hence, Option 2: Capital Account -> When an Indian manufacturer acquires a steel manufacturing unit in Europe, it represents an outward Foreign Direct Investment (FDI). Such capital movements involving acquisition of foreign assets or establishment of business operations abroad are recorded in the Capital Account of the Balance of Payments. The Capital Account tracks all international capital transfers and investments, including FDI, portfolio investments, and other capital flows. This transaction reflects capital leaving India to acquire productive assets overseas. -> correct

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Full form of IBRD

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Arrange the given statement in terms of determining the ehange rate through a floating /flexible exchange rate.

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LIST-ILIST-II
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Choose the correct answer from the options given below:

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