Assertion (A) >: Balance of Payments represents a better picture of a countrys economic transactions with the reset of the world than the Balance of Trade. Reason (R) >: Balance of Payments takes into account the exchange of both visible and invisible ite

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Q: 66 (IAS/2006)

Assertion (A): ‘Balance of Payments’ represents a better picture of a country’s economic transactions with the reset of the world than the ‘Balance of Trade’.
Reason (R): ‘Balance of Payments’ takes into account the exchange of both visible and invisible items whereas ‘Balance of Trade’ does not.

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,164,53,164,24,23,6

keywords: 

{'balance': [0, 0, 1, 1], 'economic transactions': [0, 0, 1, 0], 'payments': [0, 0, 0, 1], 'exchange': [0, 1, 2, 4], 'account': [2, 0, 3, 3]}

The correct answer is indeed `option- 1`. Let`s break this down:

Option 1 suggests that both statements (A) and (R) are true independently, and that (R) accurately explains (A). This is factual because the Balance of Payments does indeed provide a more holistic overview of a country`s economic interactions with the world as it considers both visible (goods, services) and invisible items (like financial transfers). This is something the Balance of Trade doesn`t do, as it only focuses on imports and exports of goods and services only.

Option 2 also suggests that (A) and (R) are true, but stipulates that (R) does not correctly explain (A). This option can be ruled out because (R) does in fact directly correlate with and explain (A).

Options 3 and 4 suggests either (A) is true and (R) is false, or (A) is false and (R) is true. Both of these can be ruled out because both (A) and (R) are independently correct and are related to each other.

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