Explain the distinction between autonomous and accommodating transacti

1.	Explain the distinction between autonomous and accommodating transactions in BOP. Also explain the concept of BOP deficit in this context.
Answer» Autonomous Transactions: are independent of all other transactions in the BOP. These transactions are not influenced by the foreign exchange position of the country. Exports, imports etc are some examples. Accommodating Transactions: are undertaken to cover deficit or surplus in the autonomous transactions. Therefore, their magnitude is determined by the autonomous transactions. Deficit in BOP: is determined only by the autonomous transactions. When autonomous foreign exchange payments exceed autonomous foreign exchange receipts, the excess is called BOP deficit.

Explain the distinction between autonomous and accommodating transactions in BOP. Also explain the concept of BOP deficit in this context.

Answer»

Autonomous Transactions: are independent of all other transactions in the BOP. These transactions are not influenced by the foreign exchange position of the country. Exports, imports etc are some examples.

Accommodating Transactions: are undertaken to cover deficit or surplus in the autonomous transactions. Therefore, their magnitude is determined by the autonomous transactions.

Deficit in BOP: is determined only by the autonomous transactions. When autonomous foreign exchange payments exceed autonomous foreign exchange receipts, the excess is called BOP deficit.

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