IGCSE Economics Paper-1: Specimen Questions with Answers 62 - 62 of 64

Question 62

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Question

MCQ▾

In balance of payment a debit occurs due to

1) Low imports and high exports

2) High imports and Low exports

Choices

Choice (4)

a.

Only 2 is correct

b.

Only 1 is correct

c.

Question does not provide sufficient data or is vague

d.

None of the above

Answer

b.

Explanation

  • A debit balance in balance of payment occurs because of low imports and high exports and when there are high imports and low exports it shows a credit balance. The balance also depends on the value of the exports and imports.

  • The balanced status of the balance of payment shows, the sum of all credits is identical to the sum of all debits, giving a zero net balance of all entries.

  • While recording an economy’s transactions with the world, balance of payments accounts are divided into two accounts:

    • Current account- it records transactions in goods, services, primary income, and secondary income.

    • Capital and financial account- records capital transfers, receivable and payable between residents and nonresidents, acquisition or disposal of non-produced, non-financial assets and transactions in financial assets and liabilities, classified according to the functional categories, sectors, instruments, and maturities used for net international financing transactions.

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