Open Economy Macroeconomics Test 13

Depreciation makes a country's exports become cheaper in the international market (the reason exports increase and get benefit). On the other hand with an appreciation in it the oil marketing companies of India are able to import cheaper crude oil.

Depreciation does not hamper the production process. It is the general wear and tear in the value of assets. Depreciation is just a book entry whereas capital loss is realized when assets are sold. Natural calamities affect the production process.

In the case of depreciation, provision is made for the replacement of assets as it is an expected loss. Depreciation refers to general wear and tear in the value of assets.

The current account : The current account is used to mark the inflow and outflow of goods and services into a country. Earnings on investments, both public and private, are also put into the current account.
The capital account : The capital account is where all international capital transfers are recorded. This refers to the acquisition or disposal of non-financial assets (for example, a physical asset such as land) and non-produced assets, which are needed for production but have not been produced, like a mine used for the extraction of diamonds.
The Official Settlement Account of The Financial Account : In the financial account, international monetary flows related to investment in business, real estate, bonds and stocks are documented. Also included are government-owned assets such as foreign reserves, gold, Special drawing rights (SDRs) held with the International Monetary Fund, private assets held abroad, and direct foreign investment. Assets owned by foreigners, private and official, are also recorded in the financial account.
Errors and Omission : The errors may be due to statistical discrepancies and omissions may be due to certain transactions that my not be recorded. 

The country faces inflationary pressure. India's composition of trade is heavily biased in favour of imports which makes its trade balance become more negative.

Balance of trade = Exports - Imports = 6958-7555= -597 .
As Imports are greater than exports hence it is unfavourable.

Capital loss hampers the production process. It causes loss in the value of fixed assets. This loss is not realized until the asset is sold for a price that is lower than the original purchase price.

Diplomatic staff, foreign military personnel, tourists, migratory workers, and branches of foreign companies are not included in residents of a country.

Under flexible exchange rate depreciation and appreciation takes place. Under fixed exchange rate devaluation and revaluation takes place.

Unexpected obsolescence refers to the fall in the value of fixed assets due to natural calamities and economic recession. For this, Natural calamities and economic recession result in this obsolescence. In this respect, It is not regarded as a part of depreciation. Here, The loss due to this is added to a capital loss. It is managed through the insurance of fixed assets. In this respect, the loss cannot be predicted before. Unexpected obsolescence occurs due to natural calamities like earthquakes, floods, etc., or due to thefts, accidents, etc. Hence, option B is correct.