Balance of Payments Test

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Balance of Payments Test - 7

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Weekly Quiz Competition

Question 1
1 / -0

If Toyota Company, establishes a factory in Pakistan, this will be recroded in balance of payments in the section:

A
Official financing

B
Visible balance

C
Capital account

D
Invisible balance

Solution

Capital account
Question 2
1 / -0

If CDA (Capital Development Authority, Islamabad) gets a loan from World Bank for roads, it will be recorded in the balance of payments in section:

A
Visible balance

B
Invisible balance

C
Official financing

D
Capital account

Solution

Capital account
Question 3
1 / -0

Which transactions determine the balance of trade?

A
Exports of goods and imports of goods

B
Change in Borrowing and lending by the govt.

C
Borrowing and lending to and from abroad

D
Investment to and from abroad

Solution

The difference between the value of goods and services exported out of a country and the value of goods and services imported into the country. The balance of trade is the official term for net exports that makes up the balance of payments. The balance of trade can be a "favorable" surplus (exports exceed imports) or an "unfavorable" deficit (imports exceed exports). The official balance of trade is separated into the balance of merchandise trade for tangible goods and the balance of services.
Question 4
1 / -0

Balance of trade is in surplus when

A
the value of exports of goods is greater than the value of imports of goods

B
the value of exports of goods is equal to the value of imports of goods

C
the value of imports of goods is greater than the value of exports of goods

D
None of these

Solution

A trade surplus is an economic measure of a positive balance of trade, where a country's exports exceed its imports. A trade surplus represents a net inflow of domestic currency from foreign markets. trade surplus helps to strengthen a country’s currency; however, this is dependent on the proportion of goods and services of a country in comparison to other countries as well as other market factors. Countries can also highly control their currency through foreign investment efforts.
Question 5
1 / -0

A deficit in BOP occurs

A
When autonomous foreign exchange payments exceeds autonomous foreign exchange receipts

B
When autonomous foreign exchange payments is less than autonomous foreign exchange receipts

C
When autonomous foreign exchange payments equals autonomous foreign exchange receipts

D
When autonomous foreign exchange payments is in negative deficit

Solution

Balance of payments includes all external visible and non-visible transactions of a country. If a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign investments, by running down currency reserves or by receiving loans from other countries.
Question 6
1 / -0

Devaluation is a

A
Increase in the price of domestic currency in terms of all foreign currencies by the govt.

B
Reduction in the price of domestic currency in the foreign exchange market by the govt.

C
Reduction in the price of foreign currency in terms of domestic currencies by the govt.

D
Reduction in the price of domestic currency in terms of all foreign currencies by the govt.

Solution

Devaluation refers to fixed exchange regime where exchange rate is determined exogenously, by central bank.
Question 7
1 / -0

Depreciation is a

A
Reduction in the price of foreign currency in terms of domestic currencies in the market

B
Reduction in the price of domestic currency in the foreign exchange market by the govt

C
Reduction in the price of domestic currency in terms of all foreign currencies by the govt

D
Reduction in the price of foreign currency in terms of domestic currencies in the market

Solution

Depreciation refers to flexible exchange regime where exchange rate is determined by market forces .
Question 8
1 / -0

When price of a foreign currency rises its supply also rises.

A
Always

B
Can’t say

C
Sometimes

D
Never

Solution

When price of foreign currency increases the goods and services of the other country become cheaper. So, they buy more from that country and supply more of foreign currency in the forex market .
Question 9
1 / -0

Which of the following must always balance?

A
Balance of visible trade

B
Balance of invisible trade

C
Balance on the current balance

D
Balance of payments

Solution

Balance of payments
Question 10
1 / -0

The demand for foreign exchange and the exchange rate has

A
Inverse relationship

B
Indirect relationship

C
Direct relationship

D
Exponential relationship

Solution

More foreign currency is earned when exchange rate is lower and less foreign currency is earned when foreign exchange rate high.

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Re-Attempt Weekly Quiz Competition

Balance of Payments Test - 7

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Balance of Payments Test - 7

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Question 1

Official financing

Visible balance

Capital account

Invisible balance

Solution

Question 2

Visible balance

Invisible balance

Official financing

Capital account

Solution

Question 3

Exports of goods and imports of goods

Change in Borrowing and lending by the govt.

Borrowing and lending to and from abroad

Investment to and from abroad

Solution

Question 4

the value of exports of goods is greater than the value of imports of goods

the value of exports of goods is equal to the value of imports of goods

the value of imports of goods is greater than the value of exports of goods

None of these

Solution

Question 5

When autonomous foreign exchange payments exceeds autonomous foreign exchange receipts

When autonomous foreign exchange payments is less than autonomous foreign exchange receipts

When autonomous foreign exchange payments equals autonomous foreign exchange receipts

When autonomous foreign exchange payments is in negative deficit

Solution

Question 6

Increase in the price of domestic currency in terms of all foreign currencies by the govt.

Reduction in the price of domestic currency in the foreign exchange market by the govt.

Reduction in the price of foreign currency in terms of domestic currencies by the govt.

Reduction in the price of domestic currency in terms of all foreign currencies by the govt.

Solution

Question 7

Reduction in the price of foreign currency in terms of domestic currencies in the market

Reduction in the price of domestic currency in the foreign exchange market by the govt

Reduction in the price of domestic currency in terms of all foreign currencies by the govt

Reduction in the price of foreign currency in terms of domestic currencies in the market

Solution

Question 8

Always

Can’t say

Sometimes

Never

Solution

Question 9

Balance of visible trade

Balance of invisible trade

Balance on the current balance

Balance of payments

Solution

Question 10

Inverse relationship

Indirect relationship

Direct relationship

Exponential relationship

Solution

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