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All previous year questions from Chapter: Balance of Payments
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Michel, an entrepreneur of Country Zeta, borrowed 5millionfromanoverseasbanktoexpandhistextilebusiness.Duringthesamefinancialyear,theGovernmentofCountryZetasecuredaloanof 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 5millionfromanoverseasbanktoexpandhistextilebusiness.Duringthesamefinancialyear,theGovernmentofCountryZetasecuredaloanof 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.