question_answer

Explain the distinction between autonomous and accommodating transactions in balance of payments. Also explain the concept of balance of payments 'deficit' in this context.

Answer:

Autonomous Transactions	Accommodating Transactions
Autonomous Transactions refer to those international economic transaction that are undertaken with the sole motive of earning profit.	Autonomous Transactions refer to those international economic transactions that are undertaken to correct the disequilibrium in the autonomous items.
Autonomous Transactions are also called ?above the line items? in BOP.	Accommodating items are also called ?below the line items? in BOP.
Such transactions are independent of the BOP status of a country.	Such transactions depend on the BOP status of a country as they are compensating short-term capital transactions that are undertaken to correct the disequilibrium in the autonomics items.
When autonomous foreign exchange payments are more than autonomous foreign exchange receipts, this excess is called deficit in balance of payments.