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UPSC 2006: Assertion (A): ‘Balance of Payments’ represents a better picture of a country’s economic transactions with the rest of the world than the ‘Balance of Trade’. Reason (R): ‘Balance of Payments’ takes into account the exchanges of both visible and invisible items whereas ‘Balance of Trade’ does not.
(a)Both A and R are true and R is the correct explanation of A
(b)Both A and R are true but R is not a correct explanation of A
(c)A is true but R is false
(d)A is false but R is true
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Not attemptedCorrect Answer: (a) Both A and R are true and R is the correct explanation of A
The Balance of Payments (BoP) records all economic transactions of a country with the rest of the world—including both visible merchandise trade and invisible items such as services, transfers, income and capital flows—whereas the Balance of Trade (BoT) covers only visible exports and imports of goods. Thus both the Assertion and the Reason are true, and the Reason correctly explains why BoP provides a fuller picture than BoT. ([rbi.org.in](https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?ID=596&utm_source=openai))
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Frequently Asked Questions
What is the correct answer to this UPSC 2006 Indian Economy question?▼
The correct answer is option (a): Both A and R are true and R is the correct explanation of A. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this External Sector & Balance Of Payments question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2006, GS Paper 1, as Question 16. It falls under Indian Economy > External Sector & Balance Of Payments.
What is the difficulty level of this UPSC question?▼
This question is rated "moderate". It requires sound conceptual understanding of the topic.
How many UPSC Prelims questions have been asked from External Sector & Balance Of Payments?▼
UPSC has asked 49 questions from External Sector & Balance Of Payments (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.