Balance of Payments Test

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Balance of Payments Test - 15

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Weekly Quiz Competition

Question 1
1 / -0

Which of the following defines BoP (Balance of Payment)?

A
Transaction in the flow of capital

B
Transactions relating to receipts and payment of Invisibles

C
Transactions relating only to exports and imports

D
A systematic record of all its economic transactions with the rest of the world

Solution

A systematic record of all its economic transactions with the rest of the world defines BoP (Balance of Payment).

A Balance of Payment Account is a systematic record of all economic transactions between residents of a country and the rest of the world carried out in a specific period of time.

‘Balance of Payment Account is a summary of international transactions of a country for a given period (i.e., financial year). It records a country’s transactions with the rest of the world involving the inflow and outflow of foreign exchange. In short, BOP Account is a summary statement of transactions in foreign exchange in a year.
Question 2
1 / -0

If the level of autonomous investment in an economy is Rs.200 crores and consumption function of the economy is :

C=80+0.75Y

What will be the equilibrium level of income?

A
1000

B
Rs.1120 crores .

C
1300

D
1200

Solution

For equilibrium level of income,

Y=C+I .......... (1)

C=80+0.75Y, I=200 crores

Substituting the values of C and I in (1) we have Y=80+0.75Y+200

(Y-0.75Y)=80+200=280

0.25Y=280

Y=280×\(\frac{100}{25}\)=1120
Question 3
1 / -0

Current Account of Balance of Payment does not include:

A
Export of Goods

B
Import of Goods

C
Transfer Payments

D
Foreign Direct Investment

Solution

Current Account in Balance of Payment shows the trade of visible and invisible items plus transfer Payments. On the other hand, Capital Account represents the capital inflows and outflows.

Therefore, Foreign Direct Investment is a component of the Capital Account.
Question 4
1 / -0

Balance of Payments ‘deficit’ is the excess of:

A
Current account payments over current account receipts

B
Capital account payments over capital receipts

C
Autonomous payments over autonomous receipt

D
Accommodating payments over accomodating receipts

Solution

Balance of Payments ‘deficit’ is the excess of Autonomous payments over autonomous receipt.
Question 5
1 / -0

A source of demand for foreign exchange is:

A
Brokerage of goods & services

B
Export of goods & services

C
Smuggle of goods & services

D
Import of goods & services

Solution

Foreign Exchange is demanded to make the payment for imports of goods and services.
Question 6
1 / -0

A deficit in BOP occurs:

A
When autonomous foreign exchange payments equals autonomous foreign exchange receipts

B
When autonomous foreign exchange payments is less than autonomous foreign exchange receipts

C
When autonomous foreign exchange payments exceeds autonomous foreign exchange receipts

D
When autonomous foreign exchange payments is in negative deficit

Solution

Balance of payments includes all external visible and non-visible transactions of a country. If a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign investments, by running down currency reserves or by receiving loans from other countries.
Question 7
1 / -0

If value of visible exports is greater than the value of invisible imports, the balance relates to:

A
Current account Bop

B
Trade Deficit

C
Capital account BoP

D
Can’t be determined

Solution

Only visible exports are compared with visible imports and invisible exports are compared to invisible imports.
Question 8
1 / -0

Surplus in BoP arises when:

A
Autonomous Payments > Autonomous Receipts

B
Accommodating Receipts > Accommodating Payments

C
Accommodating Payments > Accommodating Receipt

D
Autonomous Receipts > Autonomous Payments

Solution

Surplus in BOP Arises when Autonomous Receipt is more than Autonomous Payment.
Question 9
1 / -0

Flexible exchange rate is:

A
Determined

B
Fixed

C
Ordered

D
None of these

Solution

Flexible exchange-rate system is a monetary system that allows the exchange rate to be determined by supply and demand. As it variates according to market forces.
Question 10
1 / -0

If mpc = 0.8 income multiplier will be:

A
2.0

B
3

C
5

D
4

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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Balance of Payments Test - 15

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Balance of Payments Test - 15

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Question 1

Transaction in the flow of capital

Transactions relating to receipts and payment of Invisibles

Transactions relating only to exports and imports

A systematic record of all its economic transactions with the rest of the world

Solution

Question 2

1000

Rs.1120 crores .

1300

1200

Solution

Question 3

Export of Goods

Import of Goods

Transfer Payments

Foreign Direct Investment

Solution

Question 4

Current account payments over current account receipts

Capital account payments over capital receipts

Autonomous payments over autonomous receipt

Accommodating payments over accomodating receipts

Solution

Question 5

Brokerage of goods & services

Export of goods & services

Smuggle of goods & services

Import of goods & services

Solution

Question 6

When autonomous foreign exchange payments equals autonomous foreign exchange receipts

When autonomous foreign exchange payments is less than autonomous foreign exchange receipts

When autonomous foreign exchange payments exceeds autonomous foreign exchange receipts

When autonomous foreign exchange payments is in negative deficit

Solution

Question 7

Current account Bop

Trade Deficit

Capital account BoP

Can’t be determined

Solution

Question 8

Autonomous Payments > Autonomous Receipts

Accommodating Receipts > Accommodating Payments

Accommodating Payments > Accommodating Receipt

Autonomous Receipts > Autonomous Payments

Solution

Question 9

Determined

Fixed

Ordered

None of these

Solution

Question 10

2.0

3

5

4

Solution

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