distinguish between autonomous transaction and accommodating transactions in the balance of payment what is the significance of this distinction - Economics - Open Economy Macroeconomics

Question

distinguish between autonomous transaction and accommodating
transactions in the balance of payment ?what is the significance of
this distinction?plz explqin in brief 6 marks q I am unable to
explain significance

Vaishali Nebhwani · Accepted Answer

Dear student,

Following are some differences between autonomous and accommodating
transactions:

Autonomous
transactions
Accommodating
transactions

These are the international transactions
which are undertaken for economic motive, i e profit
These are the international transactions
which are not undertaken for economic motive for example-
government financing

These transactions are called Above the
line items in BOP
These transactions are called Below the
line items in BOP

The balance of these transactions govern
the overall BOP balance
These transactions are compensating in
nature These transactions correct the disequilibrium in autonomous
items

If autonomous receipts are less than
payments then it show deficit balance in BOP and vice versa
If there is deficit balance in BOP, then
government run down its reserve in form of accommodating
transaction to cover deficit in autonomous transaction

Regards

Autonomous transactions	Accommodating transactions
These are the international transactions which are undertaken for economic motive, i.e profit.	These are the international transactions which are not undertaken for economic motive. for example- government financing.
These transactions are called Above the line items in BOP.	These transactions are called Below the line items in BOP.
The balance of these transactions govern the overall BOP balance.	These transactions are compensating in nature. These transactions correct the disequilibrium in autonomous items.
If autonomous receipts are less than payments then it show deficit balance in BOP and vice versa.	If there is deficit balance in BOP, then government run down its reserve in form of accommodating transaction to cover deficit in autonomous transaction.

distinguish between autonomous transaction and accommodating transactions in the balance of payment ?what is the significance of this distinction?plz explqin in brief 6 marks q.I am unable to explain significance.