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“Mr. Spector, a… (Class 12 Economics SQP 2025-26, Q14)

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EconomicsCBSE Class 12 · Sample paper, session 2025-26 · 4 marks · Short answer

CBSE Class 12 Economics sample paper 2025-26: question 14

From the official CBSE sample question paper for 2025-26, section A, question 14, for 4 marks. Try it first; the hints and our step-by-step solution are below.

Q14 · 4 marks · Short answerCompetency-basedOpen Economy Macroeconomics

“Mr. Spector, a normal resident of XYZ country, took a 5 billion from an international financial institution to cover the Balance of Payments (BoP) deficit prevailing in the country.”
Mishika, an economics student, read the above information and identified both the transactions cited, as autonomous transactions in the BoP account of XYZ country.
Do you agree with Mishka’s identification of the underlying concept? Give valid arguments in support of your answer.

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2025-26.

Hints

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

Hint 1

Why did each party borrow?

Hint 2

Which transaction exists only because of the BoP gap?

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. No, Mishika is not fully right. Mr. Spector's loan from an overseas bank is an autonomous transaction.

    1 mark

  2. Autonomous transactions take place for an economic motive such as profit (here, expanding his business) and are independent of the state of the BoP. They are "above the line" items.

    1 mark

  3. The government's borrowing from an international institution to cover the BoP deficit is an accommodating transaction.

    1 mark

  4. Accommodating transactions are made by the monetary authorities to cover a deficit or surplus in the BoP and are not driven by any economic motive.

    1 mark

Answer: Disagree: Mr. Spector's loan is autonomous (economic motive), but the government's loan to cover the BoP deficit is accommodating.

Where the marks are

  • Autonomous transaction identified and explained (2)
  • Accommodating transaction identified and explained (2)

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 2025-26: 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.