| Assertion [A] Purchase of Machinery from rest of the world is an economic transaction of capital account of BoP. |
| Reason [R] Any transaction that impacts the assets or liabilities of a country are recorded on current account of BoP. |
A) Both Assertion [A] and Reason [R] are correct and Reason [R] is the correct explanation of Assertion (A)
B) Both Assertion [A] and Reason(R) are correct, but Reason [R] is not the correct explanation of Assertion (A)
C) Assertion [A] is correct, but Reason [R] is incorrect
D) Both Assertion [A] and Reason [R] are incorrect
Correct Answer: A
Solution :
Purchase of machinery will be recorded in current account of BoP as it is considered as an import of goods. Whereas transaction that has an impact on the assets or liabilities of the country is recorded in capital account of BoP.
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