Economics Test

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Economics Test - 28

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Weekly Quiz Competition

Question 1
5 / -1

A downward movement along the demand curve for foreign exchange indicates

A
Appreciation of currency

B
Depreciation of currency

C
Devaluation of currency

D
Revaluation of currency

Solution

A downward movement along demand curve is caused by fall in exchange rate, which represents appreciation of domestic currency.
Question 2
5 / -1

he US $ exchange rate for rupee is ₹ 75 now, as compared to ₹ 63 previously. This shows that the value of rupee has

A
depreciated

B
appreciated

C
devalued

D
revalued

Solution

Price of US Dollar rose from ₹ 63 per unit to ₹ 75 per unit, this shows that the value of domestic currency has fallen over the time period due to market forces. This is known as depreciation of domestic currency.
Question 3
5 / -1

If ₹ 75 are required to buy 1$, instead of ₹ 78 per US Dollar, this situation is indicating that

A
Domestic currency has appreciated

B
Domestic currency has depreciated

C
Rupee value of import bill will increase

D
Rupee value of export bill will decrease

Solution

As less units of domestic currency are required to exchange one unit of foreign currency, this situation refers to appreciation of domestic currency.
Question 4
5 / -1

Clean floating exchange rate is determined at a point wher

A
Demand for foreign exchange and Supply of foreign exchange are equal

B
Demand for foreign exchange is less than Supply of foreign exchange

C
Demand for foreign exchange is more than Supply of foreign exchange

D
Determined by the central bank

Solution

Floating exchange rate is determined by the market forces of demand and supply. Like a general price determination, exchange rate is determined at a point where demand and supply are equal.
Question 5
5 / -1

It has been observed in recent times that Indian currency is depreciating against US Dollar. Which of the following reason can be accounted for the same?

A
Rising inflation in the county

B
Fall in stock prices

C
Rise in global prices

D
All of the above

Solution

There are many reasons that can be accounted for depreciation of Indian currency against UD Dollar, few of such reasons are listed in options.
Question 6
5 / -1

Assertion (A): Demand for foreign exchange and exchange rate moves in the same direction.

Reason (R): When exchange rate rises domestic goods becomes cheaper in international market.

Alternatives

A
Assertion (A) is true and Reason (R) is a correct reason of Assertion (A).

B
Assertion (A) is true and Reason (R) is not a correct reason of Assertion (A)

C
Assertion (A) is false, but Reason (R) is true

D
Both are false

Solution

Demand for foreign exchange and exchange rate are inversely proportional, i.e., with increase in one other fall and vice-versa.
Question 7
5 / -1

Assertion (A): Manage floating exchange rate system is a hybrid system of exchange rate used by the most of the countries in recent time.

Reason (R): Excessive fluctuation in exchange rate system is checked by the central authority under dirty floating exchange rate.

Alternatives

A
Assertion (A) is true and Resason (R)is a correct reason of Assertion (A)

B
Assertion (A) is true and Resason (R)is not a correct reason of Assertion (A)

C
Assertion (A) is false, but Resason (R) is true

D
Both are false

Solution

Under managed floating exchange rate, price is determined by the market forces however, excessive fluctuation is checked by the central bank. Thus, this system has components of both fixed and floating exchange rate system and known as dirty floating exchange rate.
Question 8
5 / -1

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 capital account of BoP.

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

Solution

Accommodating transactions are undertaken for balancing the BoP, thus these are only recorded in capital account of BoP.
Question 9
5 / -1

Balance on invisible trade is equal to

A
Export of goods - Import of goods

B
Export of services - Import of services

C
Import of goods - Export of goods

D
Import of services - Export of goods

Solution

Invisible items are the services. Balance on invisible items is calculated as the difference between exports and imports of services.
Question 10
5 / -1

Balance of trade is a _______ concept as compared to balance of payments.

A
narrower

B
broader

C
similar

D
None of the above

Solution

Balance of trade only includes export and import of goods while balance of payments includes all international concepts. So, BoT is a narrower concept as compared to BoP.

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Re-Attempt Weekly Quiz Competition

Economics Test - 28

Result

Economics Test - 28

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SHARING IS CARING

Question 1

Appreciation of currency

Depreciation of currency

Devaluation of currency

Revaluation of currency

Solution

Question 2

depreciated

appreciated

devalued

revalued

Solution

Question 3

Domestic currency has appreciated

Domestic currency has depreciated

Rupee value of import bill will increase

Rupee value of export bill will decrease

Solution

Question 4

Demand for foreign exchange and Supply of foreign exchange are equal

Demand for foreign exchange is less than Supply of foreign exchange

Demand for foreign exchange is more than Supply of foreign exchange

Determined by the central bank

Solution

Question 5

Rising inflation in the county

Fall in stock prices

Rise in global prices

All of the above

Solution

Question 6

Assertion (A) is true and Reason (R) is a correct reason of Assertion (A).

Assertion (A) is true and Reason (R) is not a correct reason of Assertion (A)

Assertion (A) is false, but Reason (R) is true

Both are false

Solution

Question 7

Assertion (A) is true and Resason (R)is a correct reason of Assertion (A)

Assertion (A) is true and Resason (R)is not a correct reason of Assertion (A)

Assertion (A) is false, but Resason (R) is true

Both are false

Solution

Question 8

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 capital account of BoP.

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

Solution

Question 9

Export of goods - Import of goods

Export of services - Import of services

Import of goods - Export of goods

Import of services - Export of goods

Solution

Question 10

narrower

broader

similar

None of the above

Solution

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