Skip to content

Answer the following. (Class 12 Economics SQP 2024-25, Q13)

questionbuddy.in/q/cbse-12-economics-2024-25-sqp-q13

EconomicsCBSE Class 12 · Sample paper, session 2024-25 · 4 marks · Short answer

CBSE Class 12 Economics sample paper 2024-25: question 13

From the official CBSE sample question paper for 2024-25, section A, question 13, for 4 marks. Try it first; the hints and our step-by-step solution are below.

Q13 · 4 marks · Short answerCompetency-basedOpen Economy Macroeconomics

Answer the following.

  1. (I)

    ‘Foreign Portfolio Investment (FPI) witnessed a sharp turnaround during 2023-24 with net FPI inflows of US$ 32.4 billion.’
    In which sub-account and on which side of the Balance of Payments account the above transaction will be recorded? Give reasons in support of your answer.

    3 marks
  2. (II)

    State the meaning of ‘Balance of Payments Deficit’.

    1 mark

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2024-25.

Hints

Open one hint at a time and try again before the next.

Hint 1

Does FPI bring dollars in or send them out?

Hint 2

Does it affect assets and liabilities or current income?

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. (I) Net FPI inflow is recorded on the credit side of the capital account of the BoP.

    1 mark

  2. Credit side: it brings foreign exchange into the country.

    1 mark

  3. Capital account: it changes the ownership of financial assets (shares and bonds) between residents and the rest of the world, creating a liability for the country.

    1 mark

  4. (II) A BoP deficit occurs when autonomous receipts fall short of autonomous payments during the year.

    1 mark

Answer: (I) Credit side of the capital account (foreign exchange inflow, change in ownership of assets). (II) BoP deficit: autonomous receipts < autonomous payments.

Where the marks are

  • Sub-account and side with reasons (3)
  • Meaning of BoP deficit (1)

Revise the chapter

Practise this chapterBoard-style questions from Open Economy Macroeconomics, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2024-25: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.