Skip to main contentSkip to solution

Which of the following international transactions are meant to bridge the gap in BOP

Solution

✅ Correct Option: 3

Option 1 -> Current Account transactions record trade in goods, services, income, and transfers but don't specifically bridge BOP gaps.

Option 2 -> Autonomous Transactions are independent transactions driven by profit or consumption motives, not BOP correction.

Option 3 -> Accommodating transactions are specifically undertaken to finance and bridge the deficit or surplus gap in BOP.

Option 4 -> All international transactions is too broad; only specific transactions bridge BOP gaps.


Hence, Accommodating transactions -> These are also called 'below the line' transactions or compensatory transactions. They are undertaken by monetary authorities (like central banks) specifically to settle the balance of payments deficit or surplus. Examples include changes in foreign exchange reserves, borrowing from IMF, or official reserve transactions. Unlike autonomous transactions which occur independently, accommodating transactions occur as a consequence to balance the BOP account -> correct

Keyboard Shortcuts

  • Left arrow: Previous question
  • Right arrow: Next question
  • S key: Jump to solution
  • Q key: Jump to question