Giving valid reasons, state whether the following statements are true or false : (i) Dividend received from investment abroad is recorded on the credit side of the capital account. (ii) Depreciation of the Indian Currency will lead to promotion of Indian exports. Distinguish between Autonomous transactions and Accommodating transactions.

Question

Accepted Answer

(i) **False.** Dividend received from investment abroad is recorded on the credit side of the **current account** (under investment income), not the capital account. It is a factor income receipt.

(ii) **True.** Depreciation of currency promotes exports because it makes domestic goods cheaper for foreign buyers. When domestic currency depreciates, foreign buyers can purchase more goods with the same amount of foreign currency, leading to increased demand for domestic exports.