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12th Grade > Economics - 2

THE OPEN ECONOMY MCQs

Total Questions : 18 | Page 1 of 2 pages
Question 1. Current account records transactions relating to:
  1.    export and import of goods
  2.    current transfers
  3.    non-factor and factor income
  4.    all of these
 Discuss Question
Answer: Option D. -> all of these
:
D
Current account looks at all these items.
Question 2. The sale and purchase of financial assets is not a part of the BoP. State true or false.
  1.    True
  2.    False
  3.    non-factor and factor income
  4.    all of these
 Discuss Question
Answer: Option B. -> False
:
B
The given statement is false. Financial assets are a part of the BoP.
Question 3. If Rs 150 are required to buy $2, instead of Rs 100 earlier, then:
  1.    both depreciation of the domestic currency and rise in the import bill occur
  2.    rupee value of import bill will increase
  3.    domestic currency has appreciated
  4.    domestic currency has depreciated
 Discuss Question
Answer: Option A. -> both depreciation of the domestic currency and rise in the import bill occur
:
A
This is a case of depreciation, and the import bill rises as a result.
Question 4. The balance of payments of a country includes:
  1.    Official transfers of foreign currency
  2.    Smuggling transactions
  3.    Loans and aid
  4.    Both a and c
 Discuss Question
Answer: Option D. -> Both a and c
:
D
The BOP includes both official transfers of currency and loans and aid.
Question 5. Balance of payment is in disequilibrium when:
  1.    Current account balance + capital account balance is some negative number
  2.    Current account balance + capital account balance is not equal to zero
  3.    Current account balance + capital account balance is some positive number
  4.    All of the above
 Discuss Question
Answer: Option A. -> Current account balance + capital account balance is some negative number
:
A
The balance of payments shows disequilibrium if the sum of current and capital account balance is not equal to zero, or is equal to a positive or a negative value.
Question 6. Cause of BoP imbalance relates to:
  1.    neither (a) nor (b)
  2.    autonomous items
  3.    accomodating items
  4.    both (a) and (b)
 Discuss Question
Answer: Option B. -> autonomous items
:
B
Autonomous items cause an imbalance in the BoP, and accommodating items correct these imbalances.
Question 7. Final balance of payments of an economy is:
  1.    Always in a deficit
  2.    Always in a surplus
  3.    Always balanced
  4.    Subject to wide fluctuation
 Discuss Question
Answer: Option C. -> Always balanced
:
C
The balance of payments is always balanced.
Question 8. Which of the following transactions are recorded in the current account of the balance of payments?
  1.    Import and export of goods and services
  2.    Transfers from one country to the other  
  3.    Both (a) and (b)
  4.    None of these
 Discuss Question
Answer: Option C. -> Both (a) and (b)
:
C
The current account records imports and exports, as well as transfer payments.
Question 9. Disequilibrium in the balance of payments leads to:
  1.    none of these
  2.    both (a) and (b)
  3.    decrease in official reserves with RBI
  4.    increase in official reserves with RBI
 Discuss Question
Answer: Option B. -> both (a) and (b)
:
B
Disequilibrium in the BoP can cause an increase or a decrease in the official reserves, depending on whether there is a deficit or a surplus.
Question 10. The balance of trade shows a deficit of Rs 4,000 crore and the value of imports are Rs 10,000 crore. What is the value of exports?
  1.    2,000
  2.    4,000
  3.    6,000
  4.    8,000
 Discuss Question
Answer: Option C. -> 6,000
:
C
Exports = Balance of Trade + Imports = -4,000 + 10,000 = 6,000

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