UPSC Prelims 2014 · GS Paper I
Question 30: Economy and Social Development
With reference to Balance of Payments, which of the following constitutes/constitute the Current Account?
- 1.Balance of trade
- 2.Foreign assets
- 3.Balance of invisibles
- 4.Special Drawing Rights
Select the correct answer using the code given below.
AnswerUPSC’s answer is (c).
The Current Account of the Balance of Payments records trade in goods (balance of trade, the visible items) and the balance of invisibles, which includes services, income and transfers. Foreign assets and Special Drawing Rights are not current account items: foreign assets fall in the capital account, and SDRs are reserve assets. So only 1 and 3 form the Current Account.
- 1. Balance of trade in goods is part of the current account.
- 2. Foreign assets belong to the capital account.
- 3. Services, income and transfers form the balance of invisibles.
- 4. SDRs are reserve assets, not current account items.
How you could have got this
- If you were sure statement 1 is correct, (b) goes: it leaves 1 out.
What you needed to know: Balance of trade in goods is part of the current account.
- Then, if you were sure statement 3 is correct, (a) and (d) go: each of them leaves 3 out.
What you needed to know: Services, income and transfers form the balance of invisibles.
Only (c) is left. You didn’t need statements 2 or 4.
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) Wrong. Balance of invisibles also belongs to the current account.
- (b) Wrong. Foreign assets belong to the capital account.
- (c) Right. Balance of trade and balance of invisibles make the current account.
- (d) Wrong. Foreign assets and SDRs are not current account items.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2014, General Studies Paper I, Series A. The paper on upsc.gov.in.