12th Class Economics Financial Market / वित्तीय बाजार Question Bank

done Case Based MCQs - Balance of Payments Total Questions - 10

• question_answer1)

  Direction: Q. 1 to 5

  Read the following case study and answer questions.

  National income and balance of payments are two important macroeconomic variables. In an open economic model, national income is sum total of expenditures of all the sectors of an economy. GDP is probably the most widely reported and closely monitored aggregate statistic.

  GDP is a measure of the size of an economy. It tells us the total amount of 'stuff the economy produces. Any change in the demand for domestic goods leads to change in national income of the country. Also, changes in foreign exchange rate affects trading relation between countries.

  What will be the likely impact of increase in exports on balance of trade?
  A)
  Improve done clear
  B)
  Deteriorate done clear
  C)
  No change done clear
  D)
  Can't be predicted done clear
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• question_answer2)

  Assertion [A] Improvement in balance of payments has an incremental impact on the national income of a period.

  Reason [R] Inflow of foreign exchange in the domestic country is caused by changing rate of returns around the globe.

  A)
  Assertion [A] is true and Reason [R] is a correct reason of Assertion (A) done clear
  B)
  Assertion [A] is true but Reason [R] is not a correct reason of Assertion (A) done clear
  C)
  Assertion [A] is false, Reason [R] is true done clear
  D)
  Both are false done clear
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• question_answer3)
  Balance of payments in general, records all transactions between resident of home country and ......... .
  A)
  non-residents of home country done clear
  B)
  citizens of rest of the world done clear
  C)
  residents of the rest of the world done clear
  D)
  All of the above done clear
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• question_answer4)
  Choose the correct statement from given below.
  A)
  National income and BoP are directly related done clear
  B)
  BoP transactions help government to maintain foreign exchange reserve done clear
  C)
  Both (a) and (b) are true done clear
  D)
  Both are false done clear
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• question_answer5)
  Foreign investment will be recorded on which of the following account of BoP?
  A)
  Current account done clear
  B)
  Capital account done clear
  C)
  Both (a) and (b) done clear
  D)
  Not recorded in BoP done clear
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• question_answer6)

  Direction: Q 6 to 10

  Read the following case study and answer questions.

  The growing strength of India's BoP was observed in the post reform period, since the crisis of 1991 continued in 2005-2006. This growing strength was inspite of a widening current account deficit to the tune of US dollar 9.2 million that is equivalent to 1.1 per cent of GDP in 2005-2006. Rising foreign investment, together with a sharp revival of inflows of non-resident deposits, maintained a strong balance in the capital account vis-à-vis high level of reserves. Given such robust, external position of RBI had deemed it opportune to revisit the issue of full capital account convertibility.

  In this scenario, Indian companies hand holdings with international agencies (taxing loans and equity partnership) plans to make huge investments in retails and infrastructure.

  Also, many companies are boosting up their foreign country operations. They are less perturbed about the rising inflation rate or the other tight money measures adopted by the government. This could be due to favourable consolidation exposure and the opportunity in covering their risk in currency future market.

  Current account of BoP records which of the following transactions?
  A)
  Transactions which are done for profit motive done clear
  B)
  Transactions which have no impact on the capital reserve of the country done clear
  C)
  Transactions which bring BoP in the state of equilibrium done clear
  D)
  Both (a) and (b) done clear
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• question_answer7)
  If government increase tariff on import of goods, how it will impact the state of BoP?
  A)
  This will lead to inflow of foreign exchange done clear
  B)
  This will lead to outflow of foreign exchange done clear
  C)
  There will be no impact on the state of BoP done clear
  D)
  Can't be predicted done clear
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• question_answer8)
  ......... transaction of BoP is carried by the central bank to bring equilibrium.
  A)
  Autonomous done clear
  B)
  Accommodating done clear
  C)
  Both (a) and (b)  done clear
  D)
  Neither (a) nor (b) done clear
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• question_answer9)

  Assertion [A] Post the economic reforms of 1991, India's BoP has improved many folds.

  Reason [R] Devaluation of currency during the new economic reforms improved the exports surplus of the country.

  A)
  Assertion [A] is true and Reason [R] is a correct reason of Assertion [A] done clear
  B)
  Assertion [A] is true and Reason [R] is not a correct reason of Assertion [A] done clear
  C)
  Assertion [A] is false, Reason [R] is true done clear
  D)
  Both are false done clear
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• question_answer10)
  Indian companies coming in collaboration with foreign companies will lead to a/an ......... for foreign exchange reserve.
  A)
  increase done clear
  B)
  decrease done clear
  C)
  no change done clear
  D)
  Either (a) or (b) done clear
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