Q.(i) Mr. Ravi, an IT entrepreneur from Bengaluru, observed that several MNC’s prefer India as their outsourcing Hub for services like software development, customer support, data management etc. His friend Priya believes this is due to certain inherent advantages of the Indian economy. In your opinion, state and explain any two factors that make India a preferred outsourcing destination.

Showing the 12 most recent of 64 on this concept.

1. CBSE 2026Set 58/1/11 markMCQ
   Q.Read the following statements : Assertion (A) and Reason (R). Choose the correct option from those given below : Assertion (A) : Unilateral Transfers are recorded in the Current Account of the Balance of Payments (BoP) of a nation. Reason (R) : Capital account records transactions which cause a change in the assets or liabilities of the country. Options : (A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true, but Reason (R) is false. (D) Assertion (A) is false, but Reason (R) is true.

   ›Reveal solutionSolution

   Both the Assertion (A) and the Reason (R) are true statements regarding the Balance of Payments. However, the Reason (R) defines the Capital Account and does not explain why Unilateral Transfers are recorded in the Current Account.

   The Balance of Payments (BoP) is a comprehensive record of all economic transactions between the residents of a country and the rest of the world over a specific period, typically a year. It is divided into two main accounts: the Current Account and the Capital Account. Understanding what each account records is crucial for analyzing a nation's international economic position.

   Let's examine Assertion (A): Unilateral Transfers are recorded in the Current Account of the Balance of Payments (BoP) of a nation.

   Unilateral transfers are one-sided transactions, meaning they involve no quid pro quo (no return payment or obligation). These include gifts, remittances (money sent by residents working abroad to their home country), grants, and donations. Since these transfers do not create any future claims or liabilities, they are considered current transactions. The Current Account records the flow of goods, services, income, and these unilateral transfers. Therefore, Assertion (A) is true.

   Now, let's look at Reason (R): Capital account records transactions which cause a change in the assets or liabilities of the country.

   The Capital Account records all international transactions that involve a resident country's assets or liabilities. These transactions create future claims or obligations. Examples include foreign direct investment (FDI), foreign institutional investment (FII), external commercial borrowings (ECBs), loans from international financial institutions, and changes in foreign exchange reserves. When a country borrows from abroad, its liabilities increase; when it invests abroad, its assets increase. These are capital transactions. Therefore, Reason (R) is also true. …

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2. CBSE 2026Set 58/3/11 markMCQ
   Q.Read the following statements carefully : Statement I : Trade in services includes both factor income and non-factor income transactions. Statement II : Current Account includes transactions related to goods, services and unilateral transfers. In the light of the given statements, choose the correct option from the following : (A) Statement I is true and Statement II is false. (B) Statement I is false and Statement II is true. (C) Both Statements I and II are true. (D) Both Statements I and II are false.

   ›Reveal solutionSolution

   Statement I is false because trade in services covers only non-factor income, while Statement II is true as the current account includes goods, services, and unilateral transfers.

   To understand why, we need to step back and look at how a country’s balance of payments is structured. The balance of payments is a systematic record of all economic transactions between residents of a country and the rest of the world during a given period. It has two main accounts: the current account and the capital account.

   The current account records transactions that arise from the exchange of goods, services, and unilateral transfers. Goods are tangible items like machinery or rice. Services are intangible — think of tourism, shipping, or consulting. Unilateral transfers are one-way payments, such as remittances from workers abroad or foreign aid. So Statement II is spot on: the current account does indeed include goods, services, and unilateral transfers. That part is correct.

   Now, Statement I talks about “trade in services.” In the NCERT framework, trade in services is a subset of the current account. But here’s the crucial distinction: services in the current account are only those that are non-factor in nature. What does that mean? Factor income refers to earnings from factors of production — primarily labour and capital. For example, interest earned on foreign bonds or dividends from shares abroad is factor income. These are recorded under a separate head called “income” in the current account, not under “services.” Services in the trade account are strictly non-factor services — like travel, insurance, or software development.

   Important

   Trade in services in the current account excludes factor income. Factor income (like interest, dividends, and profits) is recorded separately under “income” in the current account, not under “services.” …

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3. CBSE 2026Set MARCH1 markMCQ
   Q.Which one of the following is not a component of current account of balance of payments?

   (a) Investment

   (b) Trade in goods

   (c) Trade in services

   (d) Transfer payments

   ›Reveal solutionSolution

   Investment is a capital-account item, not part of the current account, so the answer is (a).

   …

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4. CBSE 2026Set MARCH1 mark
   Q.Fill in the blanks by choosing correct answers from the bracket. (Isoquant / Mixed / Investment / Transactions / Perfect Competition / Opposite) In reality, all economies are __________ economies.

   ›Reveal solutionSolution

   The correct word from the bracket is Mixed — in reality all economies are mixed economies.

   A capitalist economy leaves production and distribution entirely to private enterprise driven by the profit motive, while a centrally planned (socialist) economy leaves them to the government. Both are theoretical extremes. In practice, every economy has both a private sector and a government that provides …

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5. CBSE 2026Set ANNUAL1 markMCQ
   Q.Which of the following included in the invisible item? A) Non-factor services B) Income C) Transfers D) All of the above

   ›Reveal solutionSolution

   Invisibles include non-factor services, income and transfers alike, so the answer is D.

   In the current account of the balance of payments, 'invisibles' are transactions that do not involve trade in physical goods. They comprise: (i) non-factor services such as shipping, banking and software; (ii) factor income such as interest, profit and dividends; and (iii) current transfers such as remittances and gifts. Since all thre …

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6. CBSE 2026Set ANNUAL1 markMCQ
   Q.Which of the following is an example of trade barriers? A) Subsidies B) Circular flow C) Tariffs D) Forex rate

   ›Reveal solutionSolution

   Tariffs are a trade barrier, so the answer is C.

   Trade barriers are government-imposed restrictions on the free flow of goods between countries. A tariff is a tax levied on imported goods, which raises their price and discourages imports — a textbook trade barrier (along with quotas). Subsidies are financial assistance, the circular flow is a model of inco …

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7. CBSE 2026Set ANNUAL1 mark
   Q.Fill in the blank: ________ account records all international transactions of assets.

   ›Reveal solutionSolution

   The blank is filled by 'Capital' (capital account).

   The balance of payments has two main accounts. The current account records trade in goods, services, income and transfers, while the capital account records all international transactions in assets — such as loans, investments (FDI/FII), banking capital and changes in foreign-exchange reserve …

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8. CBSE 2026Set ANNUAL1 mark
   Q.When does a surplus situations occur in the balance of trade?

   ›Reveal solutionSolution

   A balance-of-trade surplus occurs when exports of goods exceed imports of goods.

   The balance of trade (BOT) is the difference between the value of a country's exports of goods (merchandise) and its imports of goods. A surplus (favourable balance of trade) arises when the value of exports is greater than the value of imports, so BOT is positive. If imports exceed exports, the balance of trade is in deficit. (Note: the balance of trade …

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9. CBSE 2026Set ANNUAL1 mark
   Q.Write any one feature of market economy.

   ›Reveal solutionSolution

   A market economy's central feature is that production and distribution are decided by market forces of demand and supply.

   In a market (capitalist) economy, the central economic questions — what to produce, how to produce and for whom to produce — are settled not by any central authority but by the free interaction of buyers and sellers through the price mechanism. Other features include private ownership of the means of production, freedom of enterprise and the profit motive. Writing any one of these is enough; the most fundamental is decision-making through the forces of de …

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10. CBSE 2026Set ANNUAL1 markMCQ
    Q.Balance of trade equals

    (a) Exports less imports

    (b) Exports of goods less imports of goods

    (c) Exports of services less imports of services

    (d) None of these

    ›Reveal solutionSolution

    Balance of trade = exports of goods − imports of goods (visible items only), so the answer is (b).

    The balance of trade (also called the balance of visible trade) records only the export and import of goods (visible, tangible items). It is the difference between the value of a country's exports of goods and its imports of goods. If exports of goods exceed imports of goods, there is a trade surplus; if imports exceed exports, a trade deficit. (Services are invisible ite …

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11. CBSE 2026Set ANNUAL1 mark
    Q.In which economic system there is co-existance of private as well as public sectors?

    ›Reveal solutionSolution

    A Mixed Economy has both private and public sectors co-existing and operating together.

    Economic systems range from a pure Market (Capitalist) Economy, where private ownership and the price mechanism alone organise all economic activity, to a pure Centrally Planned (Socialist) Economy, where the government owns resources and plans all production. A Mixed Economy sits between these two: both PRIVATE firms/individuals (responding to market price signals) and PUBLIC SECTOR enterprises/government direction (responding to planned, socially-directed goals) actively participate in production and resource allocation. India, for much of its post-independence hist …

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12. CBSE 2026Set ANNUAL1 markMCQ
    Q.The component(s) of a Balance of Payment is/are :

    (a) Current Account

    (b) Capital Account

    (c) Both

    (i) and

    (ii)

    (d) None of these

    (a) Current Account

    (b) Capital Account

    (c) Both

    (i) and

    (ii)

    (d) None of these

    ›Reveal solutionSolution

    BOP has both a Current Account and a Capital Account — not either one alone.

    The Balance of Payments is a comprehensive statement, and it is split into: (i) the Current Account, which records trade in goods (visible items/Balance of Trade), trade in services (invisible items), and income plus unilateral transfer flows (interest, profit, dividends, remittances, gifts); and (ii) the Capital Account, which records transactions involving assets and liabilities — foreign direct investment, portfolio investment, external borrowing/lending, and changes in the country's foreign exchange reserves. Both accounts toge …

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