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Economics · 2025 · 4 marks
CBSE 2025 · Region 7 · Set 1 · Q14
(i)Distinguish between Balance of Payments and Balance of Trade.(ii)Define Current Account Surplus.(i)Using suitable example, distinguish between Foreign Direct Investments (FDI) and Foreign Institutional Investments (FII).(ii)State one example of External Assistance as a component of capital account.
(i)
Distinguish between Balance of Payments and Balance of Trade.
(ii)
Define Current Account Surplus.
(i)
Using suitable example, distinguish between Foreign Direct Investments (FDI) and Foreign Institutional Investments (FII).
(ii)
State one example of External Assistance as a component of capital account.
Marking-scheme solution
(i)
Balance of Payments (BoP) is an accounting statement that provides a systematic record of all economic transactions between residents of a country and the rest of the world over a given period of time. It includes transactions in goods, services and assets.
Whereas,
Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country over a given period of time. It includes transactions in goods only.
(ii)
Current Account Surplus (CAS) arises when receipts from exports of goods & services and unilateral transfers are greater than the payments for imports of goods & services and unilateral transfers.
(i)
Foreign Direct Investment (FDI) refers to direct investments from abroad in physical assets with a considerable degree of influence and control over the firm.
Whereas;
Foreign Institutional Investment (FII) refers to investments from abroad in stocks, bonds or other financial assets and do not entail active management or control over the firm.
(ii)
Bilateral loans
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