NCERT Solutions Class 12 Economics Balance of Payment

NCERT Solutions Class 12 Economics Balance of Payment. NCERT book for Economics in class 12 is strongly recommened by teachers and the CBSE and NCERT boards. Please download the NCERT solutions for class 12 Economics free in PDF made by teachers of the best schools in India. These solutions are carefully compiled to give detailed understanding of the concepts and also steps of solutions. The NCERT solutions are free to download in pdf format. Please refer to the download link below to download the pdf file and also refer to other chapters and subjects to get the solutions to Economics NCERT book questions and exercises.

Question 1. Should a current account deficit be a cause for alarm? Explain.[1 Mark]

Answer: No, if deficit in current account is offset by the capital account, otherwise such deficit has to be met by following which is a cause for alarm.

1. Depleting Foreign Exchange reserves

2. Taking foreign Loans.

Value: Analytic.

Question 2. If inflation is higher in country A than in country B, and the exchange rate between the two countries is fixed. What is likely to happen to the trade balance between the two countries?[1 Mark]

Answer: The exports from country B to country A will go up in this situation resulting in improvement or surplus trade balance for B. But due to higher price in country A, its imports will increase for country B and it will lead to deficit in trade balance for country A.

I. Very Short Answer Type Questions (1 Mark)

Question 1. What does balance of payments account of a country record? [CBSE 2007]

Answer: Balance of payments is an accounting statement that provides a systematic record of all the economic transactions between the residents of a country and the rest of the world during a given period of time.

Question 2. What is meant by visible items?

Answer: Visible items include material goods [such as sugar, cloth, machines etc.] which can be seen or touched, counted, measured and weighted and which are duly recorded at the custom barriers.

Question 3. What is the meaning of invisible items?

Answer: Invisible items, on the other hand, refer to different kinds of services such as transport, banking, insurance etc.

Question 4. Why are imports entered as negative items in the balance of payments account?

Answer: Imports lead to an outflow of foreign exchange in the country. Thus, they are recorded as negative (debit) items.

Question 5. What is meant by balance of trade? [CBSE 2005, Sample Paper 2010]

Answer: The term “balance of trade” denotes the difference between the exports and imports of goods in a country.

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