what is significance of distinction between autonomous and accomodating items?
Dear student,
Autonomous and accommodating items are important in the sense that the overall BOP is kept in balance in terms of accommodating items in the BOP. Balance of payment has two accounts one is current account and another is capital account. It always happen that when one account is in surplus then another account is in deficit by the same amount such that the sum of these two account is always zero. Thus, in accounting sense, the overall BOP will always be in balance or in equilibrium. For example, if a country is facing a Current Account deficit, then it may finance the deficit by selling its assets or by borrowing from abroad (Surplus in Capital Account).
On the other autonomous items are important to judge the surplus or a deficit in BOP. BOP is said to be in surplus when autonomous receipts are more than autonomous payments. On the other hand, it said to be in deficit when autonomous receipts are less than autonomous payments
Autonomous and accommodating items are important in the sense that the overall BOP is kept in balance in terms of accommodating items in the BOP. Balance of payment has two accounts one is current account and another is capital account. It always happen that when one account is in surplus then another account is in deficit by the same amount such that the sum of these two account is always zero. Thus, in accounting sense, the overall BOP will always be in balance or in equilibrium. For example, if a country is facing a Current Account deficit, then it may finance the deficit by selling its assets or by borrowing from abroad (Surplus in Capital Account).
On the other autonomous items are important to judge the surplus or a deficit in BOP. BOP is said to be in surplus when autonomous receipts are more than autonomous payments. On the other hand, it said to be in deficit when autonomous receipts are less than autonomous payments