MCQExams
0:0:1
CBSE
JEE
NTSE
NEET
Practice
Homework
×
CBSE Questions for Class 12 Commerce Economics Open Economy Macroeconomics Quiz 4 - MCQExams.com
CBSE
Class 12 Commerce Economics
Open Economy Macroeconomics
Quiz 4
Who out of the following is not included in "Residents" in BOP transactions ?
Report Question
0%
Firms
0%
Foreign military personnel
0%
Government agencies
0%
Individuals
Explanation
Foreign military personnel is not included in ''Residents'' in BOP transactions.
Items which are included are:
1:Financial capital transfer.
2:External loan and investment.
3:Foreign institutional investment.
4:Issuing of external bonds.
5:Export and imports of goods and services.
In balance of payments, repayment of loans by Indian government to Japanese Government will be reflected as credit item.
Report Question
0%
True
0%
False
Explanation
It will be reflected as debit item as it leads to outflow of foreign exchange.
Inflow of foreign exchange is recorded on the ________ side.
Report Question
0%
credit
0%
debit
0%
either (A) or (B)
0%
neither (A) nor (B)
Explanation
Balance of Payments is a summary statement in which all the 'Economic Transactions' between 'Residents' and rest of the world is recorded during a particular period of time (usually, one year). It is
like a typical business account and is based on double entry system which contains two sides—credit side and debit side. Any transaction which brings in foreign exchange (currency) is recorded on credit side whereas any transaction that causes a country to lose its foreign exchange is recorded on debit side.
When receipts of foreign exchange are more than payments of foreign exchange, BOP is ____________.
Report Question
0%
Balanced
0%
Surplus
0%
Deficit
0%
None of these
Explanation
Balance of payment is a systematic record of all economic transaction between resident of a country and rest of the world in the given year. The BOP can be-
Balanced BOP- BOP is balanced when receipts of foreign exchange are equal to payment of foreign exchange.
Surplus BOP- BOP is surplus when receipts of foreign exchange are more than payments of foreign exchange.
Deficit BOP- BOO is in deficit with receipt of foreign exchange are less than payment of foreign exchange.
Hence option B is correct.
Balance of payments is a __________ concept.
Report Question
0%
flow
0%
stock
0%
both (A) and (B)
0%
neither (A) nor (B)
Foreign exchange received on account of export of Jute will be recorded in capital account.
Report Question
0%
True
0%
False
Explanation
Foreign exchange received on account of export of Jute will be recorded in the CREDIT (positive) side of the CURRENT account as it comes under export of visible items.
Which of the following is not a component of Balance of Payment?
Report Question
0%
Current account
0%
Capital Account
0%
Nominal Account
0%
None of these
Explanation
Balance of payment is an accounting statement that provides a systematic record of all economic transactions between residents of a country and the rest of the world in a given time period. There are two components of the balance of payment.
1. Current account- It is an account that records all the transactions related to the export and import of goods and services, and unilateral transfers during a given period of time.
2. Capital account- It records all those transactions between the residents of a country and the rest of the world which causes a change in the asset or liabilities of the country or government.
Hence, option C is correct
Appreciation of Indian rupees will occur when $$Rs. 45$$ have to be paid to exchange one $$US $ $$ instead of present rate of $$Rs. 40/$ $$.
Report Question
0%
True
0%
False
Explanation
In case of appreciation, lesser rupees have to be paid to exchange one US dollar, i.e. less than $$Rs. 40/$ $$
Huge international reserves are required to be maintained by the government in fixed and flexible exchange rate system.
Report Question
0%
True
0%
False
Explanation
Fixed exchange rate system is always supported with huge reserves of gold because foreign currencies are convertible to gold.
But flexible rate of exchange is the rate which is determined by the supply-demand forces in the foreign exchange market. It is also called 'free exchange rate' as it is determined by the free play of supply and demand forces in the international money market.
Increase in foreign exchange rate leads to rise in supply of foreign exchange.
Report Question
0%
True
0%
False
Explanation
The foreign exchange rate and supply of foreign exchange is positively related and it is upward sloping curve as because the components of supply of foreign exchange rise as foreign exchange rate rises. For example, exports rise as the foreign exchange rate rises.
Demand for American goods will rise in India due to appreciation of Indian currency.
Report Question
0%
True
0%
False
Explanation
Demand for American goods will rise in India due to appreciation of Indian currency. Appreciation of domestic currency is a situation of a fall in exchange rate, i.e, less rupees are needed to buy one dollar. Thus, making American goods cheaper and leading to an increase in their demand.
Devaluation and depreciation of currency are one and the same thing.
Report Question
0%
True
0%
False
Explanation
Devaluation
is reduction in value of domestic currency by the government under fixed exchange rate system.It is a deliberate effort. On the other hand,
Depreciation
is decrease in value of domestic currency due to market forces of demand and supply under flexible exchange rate system.
Under flexible exchange rate system, each country fixes its value of currency in terms of some external standard.
Report Question
0%
True
0%
False
Explanation
This happens in case of fixed exchange rate system.
Under Flexible exchange rate system, value of currency is determined by the market forces of demand and supply.
Surplus in BOP arises when:
Report Question
0%
Autonomous Payments > Autonomous Receipts
0%
Accommodating Receipts > Accommodating Payments
0%
Accommodating Payments > Accommodating Receipts
0%
Autonomous Receipts > Autonomous Payments
Foreign exchange transactions dependent on other foreign exchange transactions are called ________________.
Report Question
0%
Current Account Transactions
0%
Capital Account Transactions
0%
Autonomous Transactions
0%
Accommodating Transaction
Explanation
Accomodating transactions are compensating capital transactions which are maintained to correct the disec librium in autonomous items of balance of payment. Foreign exchange transactions dependent on other foreign exchange transactions are called accomodating transactions. The sources used to meet a deficit in BOP are-
1. Foreign exchange reserves
2. Borrowings from IMF or foreign monetary authorities.
Hence, option D is correct.
Which of the following items raises the supply of foreign exchange?
Report Question
0%
Import of goods from China
0%
Indian students going to USA for MBA
0%
Donation of 50 million $$ $ $$ received from Microsoft
0%
Purchase of land in England
_________ refers to a system in which foreign exchange rate is determined by market forces and central bank influences the exchange rate through intervention.
Report Question
0%
Flexible exchange rate system
0%
Managed floating rate system
0%
Floating exchange rate
0%
Fixed exchange rate system
Explanation
Managed floating is a tool employed by the Central bank to restore the value of the country's currency in relation to other countries within the desired limits, even when the exchange rate is determined by the market forces of demand and supply.
Supply curve of foreign exchange ____________________.
Report Question
0%
Horizontal straight line parallel to X-axis
0%
Vertical straight line parallel to Y-axis
0%
Slope downwards
0%
Slope upwards
Explanation
The foreign exchange rate and supply of foreign exchange is positively related and it is upward sloping curve as because the components of supply of foreign exchange rise as foreign exchange rate rises. For example exports rise as the foreign exchange rate rises.
Depreciation of domestic currency leads to rise in _____________.
Report Question
0%
Exports
0%
Imports
0%
Both (a) and (b)
0%
Neither (a) nor (b)
Balance of Payments 'deficit' is the excess of ______________________.
Report Question
0%
Current account payments over current account receipts.
0%
Capital account payments over capital account receipts.
0%
Autonomous payments over autonomous receipts.
0%
Accommodating payments over a accommodating receipts.
Explanation
Balance of payment account is in surplus when autonomous receipts are more than the autonomous payment and balance of payment is in deficiet when autonomous payments are less than the autonomous payment.
Hence option C is correct.
Flexible exchange rate is determined by the government.
Report Question
0%
True
0%
False
Explanation
Flexible rate of exchange is the rate which is determined by the supply-demand forces in the foreign exchange market. It is also called 'free exchange rate' as it is determined by the free play of supply and demand forces in the international money market.
A change from $$Rs.140 = 2$$ pounds to $$Rs. 60 = 1$$ pounds indicates that Rs. is:
Report Question
0%
Appreciating
0%
Depreciating
0%
Neither (a) nor (b)
0%
Either (a) or (b)
Explanation
A change from RS 140 = 2 pounds to Rs 60 = 1 pounds indicates that rupees is appreciating. Appreciation of domestic currency is a situation of a fall in exchange rate. Less rupees are needed to buy one pound.
The value of US Dollar $$ $1$$ has gone down from $$Rs. 67$$ to $$Rs. 65$$. It means that ________________.
Report Question
0%
Indian rupee has appreciated
0%
US Dollar has depreciated
0%
Both (a) and (b)
0%
None of the above
Explanation
Depreciation of US dollar will occur when Rs 65 have to be paid to exchange one US Dollar instead of Rs 67 per dollar as less rupees are needed to buy one dollar. Whereas, Indian rupee has appreciated as it is a situation of rise of foreign exchange rate.
Flexible exchange rate system is also known as __________.
Report Question
0%
pegged exchange rate system
0%
dirty floating
0%
floating exchange rate
0%
both B and C
Explanation
Flexible rate of exchange is the rate which is determined by the supply-demand forces in the foreign exchange market. It is also called 'free exchange rate' or 'floating exchange rate' as it is determined by the free play of supply and demand forces in the international money market.
Other things remaining unchanged, when in a country the price of foreign currency rises, national income is _____.
Report Question
0%
Likely to rise
0%
Likely to fall
0%
Likely to rise and fall both
0%
Not affected
Explanation
Other things remaining unchanged, when in a country the price of foreign currency rises, national income is likely to rise as it indicates the greater flow of foreign exchange in the domestic economy and that promotes a higher level of development. So national income rises as the price of foreign currency rises.
Hence, the correct option is A.
Devaluation of currency means ____________________.
Report Question
0%
Reduction in the value of domestic currency by the market forces
0%
Reduction in the value of domestic currency by the government
0%
Both (a) and (b)
0%
Neither (a) nor (b)
Explanation
Devaluation of currency mainly occurs in countries with fixed exchange rate. It refers to the reduction in the value of domestic currency by the government.
Other things remaining the same, when foreign currency becomes cheaper, the effect on national income is likely to be:
Report Question
0%
Positive
0%
Negative
0%
Positive and negative both
0%
No effect
Explanation
Price of foreign exchange and growth of national income is directly related. When foreign currency becomes cheaper, it indicates that demand of foreign exchange is higher than the supply of foreign exchange. Hence, other things
remaining the same, when foreign currency becomes cheaper, the effect on national income is likely to be negative.
Under the gold standard, all currencies were defined in terms of _____________.
Report Question
0%
brass
0%
bronze
0%
silver
0%
gold
The gold standard was the epitome of the _______________.
Report Question
0%
floating exchange rate system
0%
fixed exchange rate system
0%
managed floating system
0%
none of the above
Explanation
The gold standard was the epitome of the fixed exchange rate system.
Under this system, the value of a particular currency is defined in terms of gold.
The gold standard is a system in which a country's government allows its currency to be freely converted into fixed amounts of gold.
Hence b is the correct option.
_____________ exchange rate regime prevailed between 1870 to 1914.
Report Question
0%
Smithsonian
0%
Gold standard
0%
Brettonwoods
0%
Dollar-based
0:0:1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
0
Answered
0
Not Answered
0
Not Visited
Correct : 0
Incorrect : 0
Report Question
×
What's an issue?
Question is wrong
Answer is wrong
Other Reason
Want to elaborate a bit more? (optional)
Practice Class 12 Commerce Economics Quiz Questions and Answers
<
>
Support mcqexams.com by disabling your adblocker.
×
Please disable the adBlock and continue.
Thank you.
Reload page
