Balance of Payments Test

Result

Balance of Payments Test - 13

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Weekly Quiz Competition

Question 1
1 / -0

Balance of Trade equals:

A
Exports less import

B
Exports of goods less imports of goods

C
Exports of services less imports of services

D
None of the above

Solution

Balance of Trade is the part of Current account of BoP. It is the differnce between Export and Import of physical goods.
Question 2
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Point out a merit of flexible exchange rate:

A
Frees the private sector from holding any foreign exchange reserves

B
Frees the govt from holding any foreign exchange reserves

C
Frees the individual from holding any foreign exchange reserves

D
None of above

Solution

The system of flexible exchange rates eliminates the need for official foreign exchange reserves, if the individual governments do not employ stabilization funds to influence the rate. Thus, the problem of international liquidity is automatically solved. In fact, the present shortage of international liquidity is due to pegging the exchange rates and the intervention of the IMF authorities to prevent fluctuations in the rates beyond a narrow limit.
Question 3
1 / -0

Foreign exchange rate of a country is the:

A
price of a foreign currency in terms of the domestic currency

B
price of a foreign good in terms of the domestic good

C
price of a foreign factor in terms of the domestic factor

D
price of a foreign trade in terms of the domestic trade

Solution

Foreign exchange rate defines the price of currency of domestic country in terms of foreign currency.
Question 4
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Currency appreciation occurs when:

A
Increase in the price of the domestic currency

B
Increase in the domestic currency price of the foreign currency

C
decrease in the domestic currency price of the foreign currency

D
decrease in the price of the domestic currency

Solution

It leads to increase in the purchasing power of domestic currency in terms of foreign currency as we require to pay less per unit of foreign currency now.
Question 5
1 / -0

Foreign Exchange Transactions dependent on other Foreign Exchange Transactions are called:

A
Current account transactions

B
Capital account transactions

C
Autonomous transactions

D
Accommodating transactions

Solution

Accommodating transactions are those that are undertaken as a consequence of the autonomous transactions.
Question 6
1 / -0

Unilateral Transfers are also known as:

A
Bilateral Transfers

B
One-way Transfers

C
One-way Transfers

D
Neither (A) nor (B)

Solution

Unilateral transfers are one way transactions. where one person does not receive anyting in return from another person.
Question 7
1 / -0

Borrowing from IMF is a part of:

A
Current Account

B
Capital Account

C
Both (A) and (B)

D
None of these

Solution

Borrowing from the International Monetary Fund (IMF) typically falls under the Capital Account. When a country borrows from the IMF, the government agrees to adjust its economic policies to overcome the problems that led it to seek financial assistance.
Question 8
1 / -0

What primarily determines the level of foreign exchange reserves?

A
Acquisition/disposal of fixed assets

B
Payments of current taxes on income and wealth

C
RBI intervention in the foreign exchange market

D
Investment income receipts

Solution

The level of foreign exchange reserves is largely determined by the Reserve Bank of India (RBI) intervention in the foreign exchange market. It includes activities such as absorbing excess foreign exchange flows through interventions, aid receipts, interest receipts, and funding from international organizations.
Question 9
1 / -0

Fixed exchange rate is:

A
is fixed by the anybody in an economy

B
is fixed by the businesses in an economy

C
is fixed by the foreign exchange market

D
is fixed by the Government in an economy

Solution

A fixed exchange rate is a country's exchange rate regime under which the government or Central bank ties the official exchange rate to another country's currency or to the price of gold. The purpose of a fixed exchange rate system is to maintain a country's currency value within a very narrow band.
Question 10
1 / -0

Choose the correct statement from given below:

A
Balance of trade records the exports and imports of invisible items

B
A surplus in BoT can rectify the deficit in Bop.

C
Accommodating items are only recorded in the capital account of the BOP

D
Import of machinery will be recorded in the capital account of BoP.

Solution

Accommodating transactions are only recorded in Capital Account. Main motive of such transactions are to settle the surplus and deficit of BoP due to autonomous transactions.

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Re-Attempt Weekly Quiz Competition

Balance of Payments Test - 13

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Balance of Payments Test - 13

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Question 1

Exports less import

Exports of goods less imports of goods

Exports of services less imports of services

None of the above

Solution

Question 2

Frees the private sector from holding any foreign exchange reserves

Frees the govt from holding any foreign exchange reserves

Frees the individual from holding any foreign exchange reserves

None of above

Solution

Question 3

price of a foreign currency in terms of the domestic currency

price of a foreign good in terms of the domestic good

price of a foreign factor in terms of the domestic factor

price of a foreign trade in terms of the domestic trade

Solution

Question 4

Increase in the price of the domestic currency

Increase in the domestic currency price of the foreign currency

decrease in the domestic currency price of the foreign currency

decrease in the price of the domestic currency

Solution

Question 5

Current account transactions

Capital account transactions

Autonomous transactions

Accommodating transactions

Solution

Question 6

Bilateral Transfers

One-way Transfers

One-way Transfers

Neither (A) nor (B)

Solution

Question 7

Current Account

Capital Account

Both (A) and (B)

None of these

Solution

Question 8

Acquisition/disposal of fixed assets

Payments of current taxes on income and wealth

RBI intervention in the foreign exchange market

Investment income receipts

Solution

Question 9

is fixed by the anybody in an economy

is fixed by the businesses in an economy

is fixed by the foreign exchange market

is fixed by the Government in an economy

Solution

Question 10

Balance of trade records the exports and imports of invisible items

A surplus in BoT can rectify the deficit in Bop.

Accommodating items are only recorded in the capital account of the BOP

Import of machinery will be recorded in the capital account of BoP.

Solution

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