Open Economy Macroeconomics Test 9

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Open Economy Macroeconomics Test 9

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Weekly Quiz Competition

Question 1
1 / -0

The Foreign Exchange Reserves of India consist of __________.

A
Foreign Currency Assets held by RBI

B
Gold Holdings of RBI

C
Special Drawing Rights (SDRs)

D
All of the above

Solution

Foreign exchange reserves of India Consists of Foreign currency assets held by RBI, gold holding of RBI, special drawings Rights. Foreign exchange reserves of India are holdings of cash, bank deposits, bonds, and other financial assets. Hence, D is the correct option.
Question 2
1 / -0

India has achieved full convertibility of the Rupee in _________.

A
current account

B
capital account

C
both (a) and (b)

D
neither (a) nor (b)
Question 3
1 / -0

In the balance of Payments Statement of a country, the current account includes:
(i) Invisible items
(ii) Foreign direct investment
(iii) Government loans from abroad
(iv) Errors and omissions

A
(i) only

B
Both (i) and (ii) above

C
Both (ii) and (iii) above

D
Both (i) and (iv) above
Question 4
1 / -0

FERA stands for ____________.

A
Foreign Export Revaluation Act

B
Funds Exchange Resources Act

C
Finance and Export Regulation Association

D
Foreign Exchange Regulation Act

Solution

FERA stands for Foreign Exchange Regulation Act, 1973.
Question 5
1 / -0

BOP is in deficit, then __________.

A
it adds to external reserves of the country

B
it draws from external reserves of the country

C
it adds to internal reserves of the country

D
it draws from internal reserves of the country
Question 6
1 / -0

BOP is in surplus, then _____________.

A
it adds to external reserves of the country

B
it draws from external reserves of the country

C
it adds to internal reserves of the country

D
it draws from internal reserves of the country.
Question 7
1 / -0

Which of the following is not a component of Balance of Payment?

A
Current account

B
Capital Account

C
Nominal Account

D
None of these

Solution

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
Question 8
1 / -0

Who out of the following is not included in "Residents" in BOP transactions ?

A
Firms

B
Foreign military personnel

C
Government agencies

D
Individuals

Solution

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.
Question 9
1 / -0

Inflow of foreign exchange is recorded on the ________ side.

A
credit

B
debit

C
either (A) or (B)

D
neither (A) nor (B)

Solution

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.
Question 10
1 / -0

When receipts of foreign exchange are more than payments of foreign exchange, BOP is ____________.

A
Balanced

B
Surplus

C
Deficit

D
None of these

Solution

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.

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Re-Attempt Weekly Quiz Competition

Open Economy Macroeconomics Test 9

Result

Open Economy Macroeconomics Test 9

Score

-

Rank

-

SHARING IS CARING

Question 1

Foreign Currency Assets held by RBI

Gold Holdings of RBI

Special Drawing Rights (SDRs)

All of the above

Solution

Question 2

current account

capital account

both (a) and (b)

neither (a) nor (b)

Question 3

(i) only

Both (i) and (ii) above

Both (ii) and (iii) above

Both (i) and (iv) above

Question 4

Foreign Export Revaluation Act

Funds Exchange Resources Act

Finance and Export Regulation Association

Foreign Exchange Regulation Act

Solution

Question 5

it adds to external reserves of the country

it draws from external reserves of the country

it adds to internal reserves of the country

it draws from internal reserves of the country

Question 6

it adds to external reserves of the country

it draws from external reserves of the country

it adds to internal reserves of the country

it draws from internal reserves of the country.

Question 7

Current account

Capital Account

Nominal Account

None of these

Solution

Question 8

Firms

Foreign military personnel

Government agencies

Individuals

Solution

Question 9

credit

debit

either (A) or (B)

neither (A) nor (B)

Solution

Question 10

Balanced

Surplus

Deficit

None of these

Solution

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