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CUET Economics 2025 PYQs3 June Shift 2. Free, no login required.

Macro

past year questions, CUET Economics 2025 3 June Shift 2

Balance of Payments

past year questions, Macro, CUET Economics 2025 3 June Shift 2

Medium

Read the passage carefully and answer the questions based on the passage:

Accounts in Balance of Payments

The current account is the record of trade in goods and services and transfer payments. Trade in goods includes exports and imports of goods. Trade in services includes factor income and non-factor income transactions. Transfer payments are the receipts which the residents of a country get for free, without having to provide any goods or services in return. They could be given by the government or by private citizens living abroad. Capital Account records all international transactions of assets. The capital account is in balance when capital inflows are equal to capital outflows. The essence of international payments is that just like an individual who spends more than her income must finance the difference by selling assets or by borrowing, a country that has a deficit in its current account must finance it by selling assets or by borrowing abroad. Thus, any current account deficit must be financed by a capital account surplus, that is, a net capital inflow. Apart from the current and capital accounts, there is a third element in the balance of payments called errors and omissions.

The value of elements of the balance of payments are given as:

Exports: 150150 million

Imports: 240240 million

Invisibles: 5252 million

Non-factor Services: 3030 million

Transfers: 3232 million

What is the current account balance?

Solution

✅ Correct Option: 2

Option 2: -38 million -> The current account balance is calculated as: Trade Balance (Exports - Imports) + Net Invisibles. Trade Balance = 150million−150 million - 240 million = -90million.AddingNetInvisiblesof90 million. Adding Net Invisibles of 52 million: -90million+90 million + 52 million = -$38 million. The negative balance indicates a current account deficit, meaning the country is importing more goods and services than it is exporting. -> correct

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