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Explain the role of “Official reserve transactions” in an economy where
autonomous foreign exchange receipts are less than autonomous foreign exchange
payments.

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Transactions that are carried out by monetary authority of a country which makes changes in official reserves is known as official reserve transaction or ORT. Transactions such as purchase and sale of currency in exchange market for other assets and foreign currencies. By selling foreign currencies in exchange market during period of deficit and purchasing them during surplus period. The increase and decrease in official reserve is called as balance of payments surplus and deficit respectively. Importance of Official reserve transaction in balance of payments are: 1. Helps in adjusting deficit or surplus in balance of payments 2. Purchasing of own currency is regarded credit item in balance of payments where selling is regarded as a debit.

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