Question : Assertion: Trade barriers can affect the balance of payments negatively.

Reason: Trade barriers restrict imports and exports, leading to imbalances in the current account.

Option 1: Both Assertion and Reason are true and correct explanation

Option 2: Both Assertion and Reason are true and incorrect explanation

Option 3: Assertion is true but Reason is false

Option 4: Assertion is false but Reason is true

Correct Answer: Both Assertion and Reason are true and correct explanation

Solution : The correct answer is (a) Both Assertion and Reason are true and provide a correct explanation.

The Assertion states that trade barriers can affect the balance of payments negatively, which is true. Trade barriers, such as tariffs, quotas, and trade restrictions, can limit the flow of goods and services between countries. These barriers can hinder imports and exports, leading to imbalances in the current account. Restricting imports can reduce the outflow of foreign currency, while limiting exports can decrease the inflow of foreign currency, both affecting the balance of payments.

The Reason states that trade barriers restrict imports and exports, leading to imbalances in the current account, which is also true. Trade barriers impose restrictions on the free flow of goods and services across borders, which can disrupt the balance between imports and exports. By restricting imports, a country may experience a surplus in the current account, while limiting exports can result in a deficit. These imbalances impact the overall balance of payments.

Both the Assertion and the Reason align and provide a correct explanation for how trade barriers can affect the balance of payments negatively.