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Michel, an entrepreneur of… (Class 12 Economics 2026, Q14)

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EconomicsCBSE Class 12 · Board exam 2026, set 58/1/1 · 4 marks · Short answer

CBSE Class 12 Economics 2026: question 14

Set in the CBSE Class 12 board exam of 2026, paper 58/1/1, 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

Michel, an entrepreneur of Country Zeta, borrowed $ 5 million from an overseas bank to expand his textile business.
During the same financial year, the Government of Country Zeta secured a loan of $ 30 Billion from an International Financial Institution to manage the ongoing Balance of Payments.
Samuel, an Economics student categorised both of these transactions as ‘autonomous transactions’ in the BoP account of the country.
Do you agree with his classification ? Justify your answer with valid reasons.

Source: official question paper from cbse.gov.in (PDF). See it in the full 2026 board paper, set 58/1/1.

Hints

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

Hint 1

Why was each loan taken: for profit, or to settle the BoP?

Hint 2

Accommodating items are "below the line".

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, Samuel's classification is not fully correct. The government's $ 30 billion loan from an international financial institution, taken to manage the BoP position, is an accommodating transaction: it is undertaken by the monetary authorities to cover a deficit (or surplus) in the BoP, not for profit or any other economic motive.

    2 marks

  2. Michel's $ 5 million loan to expand his textile business is an autonomous transaction: it is made for an economic motive (profit), independently of the state of the BoP.

    2 marks

Answer: Disagree: Michel's business loan is autonomous (economic motive), but the government's loan to manage the BoP is accommodating.

Where the marks are

  • Government loan identified as accommodating, with meaning (2)
  • Michel's loan as autonomous, with meaning (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 paper2026 board paper, set 58/1/1: 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.