2006 General Studies, all questions

UPSC Prelims 2006 · General Studies

Question 16: Economy and Social Development

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.

aBoth A and R are true and R is the correct explanation of A
bBoth A and R are true but R is not a correct explanation of A
cA is true but R is false
dA is false but R is true

AnswerThe answer is (a).

The Balance of Trade records only the export and import of goods, the visible items. The Balance of Payments covers visible and invisible items (services, income and transfers) and also capital flows, so it gives a fuller picture of a country's dealings with the world. Both statements are true, and the reason is exactly why the Balance of Payments is the better measure.

  • A. Balance of Payments is the more complete picture.
  • R. It includes invisibles and capital flows; the Balance of Trade does not.

How you could have got this

If you were sure statement 1 is correct, (d) goes. Then judge the second statement; if it is correct too, decide whether it explains the first.

This follows an unofficial answer: UPSC has not published its key for this year, and if that answer is wrong, so is this path.

Which options go is worked out from UPSC’s key and the options, not by a model.

Why each option is right or wrong
  • (a) Correct: both are true, and R explains why A holds.
  • (b) R is not just true but the actual explanation of A.
  • (c) R is true, not false.
  • (d) A is true, not false.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2006, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.