Open Economy Macroeconomics Test 4

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Open Economy Macroeconomics Test 4

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Weekly Quiz Competition

Question 1
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Many times we read about 'PPP' in economic literature. What is PPP?

A
Tells us the exchange rates between currencies are in equilibrium when their purchasing power is the same in both the countries

B
It tells us the exchange rates between currencies are in equilibrium when they are adjusted for differences in purchasing power.

C
PPP means the current exchange rate of a currency against US$

D
A measure of income inequality in developing countries

Solution

The acronym PPP stands for, "Purchasing Power Parity". It is a method of currency valuation that tells us that the exchange rate between two countries must be equal to the ratio of the currencies' respective purchasing power. ie. two identical goods should eventually cost the same in different countries once adjusted for purchasing power parity.
Question 2
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___________ is a record of all economic transaction made between the residents of one country with the residents of the rest of the world.

A
Balance of payments

B
Balance of trade

C
Balance of current account

D
Balance of capital account

Solution

The balance of payments account comprises of the current account and the capital account. The current account consists of the visible and invisible imports and exports of the country as well as unilateral transfers and income receipts and payments. The capital account includes the capital receipts and capital payments such as portfolio investments. It may also maintain an official reserve account to run either a fixed exchange rate regime or a managed float regime. It accounts the country's transactions with the rest of the world.
Question 3
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Which of the following is possible in an open economy?

A
GDP=GNP

B
GDP>GNP

C
GDP<GNP

D
All the three are possible
Question 4
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The National Stock Exchange recently launched Interest Rate Futures (IRF). IRF in fact is a ______________.

A
new mode of trading specifically for SME sector

B
financial mode of trading

C
electronic mode of transferring money from one account to another

D
safest and fastest mode of trading at all the stock exchanges of India simultaneously

Solution

The National Stock Exchange recently launched Interest Rate Futures (IRF).
IRF in fact is a financial mode of trading as investors can buy and sell interest rate futures contracts from different locations in the country through registered NSE brokers in the same manner as they buy and sell equities and derivatives today. The financial settlement of all the trades is guaranteed by National Securities and Clearing Corporations Ltd (NSCCL).
Question 5
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What is Forex?

A
It is buying of foreign currency.

B
It is selling of foreign currency.

C
It is buying of one currency and selling of another currency.

D
It is simultaneous buying of one currency and selling of another currency.
Question 6
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If we add _______ to national income we get net domestic product.

A
depreciation

B
net foreign factor income

C
indirect-tax

D
transfer payments
Question 7
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The first public issuance of a company's shares to investors on a stock exchange to raise capital is known as ________.

A
Initial public offer

B
follow-up offer

C
mutual fund

D
hedge fund

Solution

When the firm decides to operate as a public limited company, the firm will need to offer a portion of its total shares to the public for the first time. This is known as an initial public offering.
Question 8
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Balance of payment accounts are prepared on a _________.

A
double account basis

B
double entry system basis

C
single entry system basis

D
none of the above
Question 9
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The outward remittances will be affected at the contractual rate (if forward contract is booked) or at the ____________.

A
TT buying rate

B
TT selling rate

C
Both (A) and (B) above

D
TT buying rate + exchange margin of $$0.15\%$$

E
None of the above

Solution

As per the rule 5 of FEDAI guidelines which deals with clean instruments, all outward remittances will be effected at the TT selling rate.
Question 10
1 / -0

Which of these reflect a country's record of all international transactions?

A
Balance of trade

B
Balance of payment

C
Statement of accounts

D
Appropriation account

Solution

The balance of payments account comprises of the current account and the capital account. The current account consists of the visible and invisible imports and exports of the country as well as unilateral transfers and income receipts and payments. The capital account includes the capital receipts and capital payments such as portfolio investments. It may also maintain an official reserve account to run either a fixed exchange rate regime or a managed float regime. It accounts the country's transactions with the rest of the world. Thus it includes a country's international trading, borrowing and lending.

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Re-Attempt Weekly Quiz Competition

Open Economy Macroeconomics Test 4

Result

Open Economy Macroeconomics Test 4

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Rank

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SHARING IS CARING

Question 1

Tells us the exchange rates between currencies are in equilibrium when their purchasing power is the same in both the countries

It tells us the exchange rates between currencies are in equilibrium when they are adjusted for differences in purchasing power.

PPP means the current exchange rate of a currency against US$

A measure of income inequality in developing countries

Solution

Question 2

Balance of payments

Balance of trade

Balance of current account

Balance of capital account

Solution

Question 3

GDP=GNP

GDP>GNP

GDP<GNP

All the three are possible

Question 4

new mode of trading specifically for SME sector

financial mode of trading

electronic mode of transferring money from one account to another

safest and fastest mode of trading at all the stock exchanges of India simultaneously

Solution

Question 5

It is buying of foreign currency.

It is selling of foreign currency.

It is buying of one currency and selling of another currency.

It is simultaneous buying of one currency and selling of another currency.

Question 6

depreciation

net foreign factor income

indirect-tax

transfer payments

Question 7

Initial public offer

follow-up offer

mutual fund

hedge fund

Solution

Question 8

double account basis

double entry system basis

single entry system basis

none of the above

Question 9

TT buying rate

TT selling rate

Both (A) and (B) above

TT buying rate + exchange margin of $$0.15\%$$

None of the above

Solution

Question 10

Balance of trade

Balance of payment

Statement of accounts

Appropriation account

Solution

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