(a)

Define Balance of Payments (BoP) Account.

(b)

Differentiate between autonomous transactions and accommodating transactions in Balance of Payments (BoP).

The Balance of Payments (BoP) account records the transactions in goods, services and assets between residents of a country and the rest of the world for a specified time period typically, a year.

Autonomous transactions are those international economic transactions which are independent of the state of Balance of Payments (BoP). These transactions are generally undertaken with an ‘economic motive’. Such transactions are called ‘above the line’ items in the BoP account.

Whereas;

Accommodating transactions are those international economic transactions which are undertaken (by competent authorities) to cover the surplus or deficit in Balance of Payments (BoP). These transactions are independent of any economic motive. Such transactions are called ‘below the line’ items in the BoP account.