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Balance of Payments Test - 8

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Balance of Payments Test - 8
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Weekly Quiz Competition
  • Question 1
    1 / -0

    The demand curve for foreign exchange is

    Solution

    At lower exchange rate more foreign currency is demanded and at higher exchange rate less foreign currency is demanded. 

  • Question 2
    1 / -0

    The supply of foreign exchange and the exchange rate has

    Solution

    As foreign currency appreciates, imports for them become cheaper. So, they supply more foreign currency in the forex market. 

  • Question 3
    1 / -0

    The supply curve of foreign exchange is

    Solution

    More of foreign currency is supplied at higher exchange rates in forex market. 

  • Question 4
    1 / -0

    The equilibrium exchange rate is determined at the point where the

    Solution

    At this point , the market for foreign exchange gets cleared. 

  • Question 5
    1 / -0

    The upward sloping supply curve for the foreign exchange reflects

    Solution

    As the price of foreign currency increases it's supply increses and as it's price decreases it's supply decreases, other factors remaining same. 

  • Question 6
    1 / -0

    The downward sloping demand curve for the foreign exchange reflects

    Solution

    Negative slope always reflects inverse relationship. 

  • Question 7
    1 / -0

    If the demand for foreign exchange rises, supply schedule remaining the same, the exchange rate will rise. It is

    Solution

    Excess demand of an entity always leads to inflation of a value. Same happens with foreign exchange. 

  • Question 8
    1 / -0

    If the Supply of foreign exchange rises, demand schedule remaining the same, the exchange rate will rise. It is

    Solution

    Excess supply of an entity always lead to deflation of value. Same happens with foreign exchange. 

  • Question 9
    1 / -0

    If c = 0.8 and m = 0.3, the open economy multiplier will be

  • Question 10
    1 / -0

    If mpc = 0.8  income multiplier  will be

    Solution

    We know that multiplier , K = 1/mps, 

    Now,mps = 1-mpc = 1-0.8 = 0.2

    Hence, k = 1/0.2 = 5

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