Question

Match List-I with List-II:

List-I	List-II
(A) Autonomous items	(I) Net of visible trade
(B) Accommodating items	(II) Above the line items
(C) Balance of trade	(III) Portfolio investment
(D) Capital account	(IV) Below the line items

Choose the correct answer from the options given below:

• A. (A)-(III), (B)-(II), (C)-(I), (D)-(IV)
• B. (A)-(II), (B)-(IV), (C)-(I), (D)-(III)
• C. (A)-(I), (B)-(II), (C)-(IV), (D)-(III)
• D. (A)-(III), (B)-(IV), (C)-(I), (D)-(II)

Answer 1

The Correct Option is B

To correctly match List-I with List-II, let's examine each item: 

• Autonomous items are transactions that occur for business or personal reasons irrespective of balance of payment considerations. These are known as above the line items (II).
• Accommodating items are transactions made to compensate for any deficit or surplus in the autonomous items. These are referred to as below the line items (IV).
• Balance of trade refers to the net of visible trade, which is the difference between the value of exports and imports of goods (I).
• Capital account comprises of financial transactions like foreign direct investment and portfolio investment (III).

Thus, the correct matching is: (A)-(II), (B)-(IV), (C)-(I), (D)-(III)

Answer 2

Autonomous items in the balance of payments refer to transactions that are made for reasons other than to balance the payments, such as trade, investment, or borrowing. These transactions are typically considered as above the line because they are independent of the need to balance the overall payment structure. In other words, these items reflect activities that are driven by market forces, such as exports, imports, foreign direct investment, and portfolio investments. These are also known as the "current transactions" because they are part of the day-to-day economic activities of a country.

Accommodating items, on the other hand, are below the line in the balance of payments. These are adjustments or transactions that occur to ensure the balance of payments remains equal. They are typically linked to financial movements such as changes in reserves, borrowing, or adjustments to the exchange rate. Accommodating items help to correct any imbalance created by autonomous transactions, ensuring that the sum of all items in the balance of payments remains zero. These items are primarily driven by government actions or central bank policies, like reserve adjustments or capital flows to balance the payment discrepancy.

Therefore, while autonomous items reflect economic activities that occur independently, accommodating items are adjustments that correct or accommodate imbalances in the balance of payments.