SELECT * FROM question_mgmt as q WHERE id=5443 AND status=1 SELECT id,question_no,question,chapter FROM question_mgmt as q WHERE courseId=3 AND subId=59 AND chapterId=607 and ex_no='1' AND status=1 ORDER BY CAST(question_no AS UNSIGNED) CBSE Free NCERT Solution of 12th macro-economics Open Economy Macroeconomics what are official reserve transactions explain th

Question:

What are official reserve transactions? Explain their importance in the balance of payments.

Answer:

The transactions carried by monetary authority of a country, which cause changes in official reserves, transactions (ORT). These transactions are carried through purchase or sale of currency in the exchange market for foreign currencies or other assets. The reserves are drawn by selling foreign currencies in the exchange market during deficits and foreign currencies are purchased during surplus.

When the official reserves increases or decreases, it is called overall balance of payments surplus or deficit respectively.

Importance of ORT in balance of payments:

1. Purchase of a country’s own currency is a credit item in the balance of payments; Whereas, sale of the currency is a debit item.
2. It helps to adjust the deficit and surplus in balance of payments.


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