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Economy question from JKAS Prelims, 2021 by JKPSC

.Read the following statements.

1. Balance of payments of a country is an aggregate record of domestic economic transactions of a country.
2. These transactions include exports and imports of goods, services and financial assets, along with transfer payments (like foreign aid).
3. The balance of payments is an important economic indicator for 'open' economies

Which of the given statements is/are true?

Last updated May 15, 2026
Correct Answer: Option D — Only 2 and 3
Here is the detailed breakdown of why Statement 1 is incorrect and the others are accurate:

Analysis of the Statements
Statement 1 (Incorrect): The Balance of Payments (BoP) is a record of transactions between residents of a country and the rest of the world, not just "domestic" transactions. Domestic transactions (those happening within the borders between residents) are tracked in different national accounts, but BoP specifically measures the international economic relationship.

Statement 2 (Correct): This accurately describes the components of the BoP. It includes the Current Account (goods, services, and transfer payments like gifts or foreign aid) and the Capital Account (financial assets, stocks, bonds, and loans).

Statement 3 (Correct): BoP is vital for "open" economies because they engage in international trade and capital flows. It helps policymakers understand the demand for the national currency, the sustainability of external debt, and the overall competitiveness of the economy.

Conceptual Overview: BoP Structure
The Balance of Payments is essentially a double-entry bookkeeping system where:

Inflows (money coming into the country) are recorded as credits (+).

Outflows (money leaving the country) are recorded as debits (-).

It is a crucial metric for identifying if a country is a "net creditor" or a "net debtor" to the global economy.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.
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JKPSC JKAS 2021 Prelims

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Exam JKPSC
Recruitment JKAS
Stage Prelims
Year 2021
Subject Economy
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