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Q1:

3 June Shift 2

Macro > Balance of Payments

Medium

Read the passage carefully and answer the questions based on the passage: Accounts in Balance of Payments The current account is the record of trade in goods and services and transfer payments. Trade in goods includes exports and imports of goods. Trade in services includes factor income and non-factor income transactions. Transfer payments are the receipts which the residents of a country get for free, without having to provide any goods or services in return. They could be given by the government or by private citizens living abroad. Capital Account records all international transactions of assets. The capital account is in balance when capital inflows are equal to capital outflows. The essence of international payments is that just like an individual who spends more than her income must finance the difference by selling assets or by borrowing, a country that has a deficit in its current account must finance it by selling assets or by borrowing abroad. Thus, any current account deficit must be financed by a capital account surplus, that is, a net capital inflow. Apart from the current and capital accounts, there is a third element in the balance of payments called errors and omissions.

The value of elements of the balance of payments are given as: Exports: $150$ million Imports: $240$ million Invisibles: $52$ million Non-factor Services: $30$ million Transfers: $32$ million What is the current account balance?

$524$ million

$-38$ million

$-90$ million

$114$ million

Correct Answer

Option 2

Correct Answer

Explanation →

Q2:

3 June Shift 2

Macro > Balance of Payments

Medium

Read the passage carefully and answer the questions based on the passage: Accounts in Balance of Payments The current account is the record of trade in goods and services and transfer payments. Trade in goods includes exports and imports of goods. Trade in services includes factor income and non-factor income transactions. Transfer payments are the receipts which the residents of a country get for free, without having to provide any goods or services in return. They could be given by the government or by private citizens living abroad. Capital Account records all international transactions of assets. The capital account is in balance when capital inflows are equal to capital outflows. The essence of international payments is that just like an individual who spends more than her income must finance the difference by selling assets or by borrowing, a country that has a deficit in its current account must finance it by selling assets or by borrowing abroad. Thus, any current account deficit must be financed by a capital account surplus, that is, a net capital inflow. Apart from the current and capital accounts, there is a third element in the balance of payments called errors and omissions.

A current account deficit means that the nation is a borrower from other countries, which can also be represented as.

Receipts > Payments

Receipts = Payments

Receipts < Payments

Constant Receipts and Payments

Correct Answer

Option 3

Correct Answer

Explanation →

Q3:

3 June Shift 2

Macro > Balance of Payments

Medium

The current account is the record of trade in goods and services and transfer payments. Trade in goods includes exports and imports of goods. Trade in services includes factor income and non-factor income transactions. Transfer payments are the receipts which the residents of a country get for free, without having to provide any goods or services in return. They could be given by the government or by private citizens living abroad. Capital Account records all international transactions of assets. The capital account is in balance when capital inflows are equal to capital outflows. The essence of international payments is that just like an individual who spends more than her income must finance the difference by selling assets or by borrowing, a country that has a deficit in its current account must finance it by selling assets or by borrowing abroad. Thus, any current account deficit must be financed by a capital account surplus, that is, a net capital inflow. Apart from the current and capital accounts, there is a third element in the balance of payments called errors and omissions.

A banking service provided by a country is accounted in the element of the balance of payment.

Factor income.

Non-factor Income.

Transfer Payments.

Capital Account.

Correct Answer

Option 2

Correct Answer

Explanation →

Q4:

3 June Shift 2

Macro > Balance of Payments

Easy

Read the passage carefully and answer the questions based on the passage: Accounts in Balance of Payments The current account is the record of trade in goods and services and transfer payments. Trade in goods includes exports and imports of goods. Trade in services includes factor income and non-factor income transactions. Transfer payments are the receipts which the residents of a country get for free, without having to provide any goods or services in return. They could be given by the government or by private citizens living abroad. Capital Account records all international transactions of assets. The capital account is in balance when capital inflows are equal to capital outflows. The essence of international payments is that just like an individual who spends more than her income must finance the difference by selling assets or by borrowing, a country that has a deficit in its current account must finance it by selling assets or by borrowing abroad. Thus, any current account deficit must be financed by a capital account surplus, that is, a net capital inflow. Apart from the current and capital accounts, there is a third element in the balance of payments called errors and omissions.

When a country exports more goods than its imports, the balance of trade is considered to be?

Surplus Balance of Trade.

Balanced Trade.

Trade Balance.

Deficit Balance of Trade.

Correct Answer

Option 1

Correct Answer

Explanation →

Q5:

3 June Shift 2

Macro > Balance of Payments

Easy

Read the passage carefully and answer the questions based on the passage: Accounts in Balance of Payments The current account is the record of trade in goods and services and transfer payments. Trade in goods includes exports and imports of goods. Trade in services includes factor income and non-factor income transactions. Transfer payments are the receipts which the residents of a country get for free, without having to provide any goods or services in return. They could be given by the government or by private citizens living abroad. Capital Account records all international transactions of assets. The capital account is in balance when capital inflows are equal to capital outflows. The essence of international payments is that just like an individual who spends more than her income must finance the difference by selling assets or by borrowing, a country that has a deficit in its current account must finance it by selling assets or by borrowing abroad. Thus, any current account deficit must be financed by a capital account surplus, that is, a net capital inflow. Apart from the current and capital accounts, there is a third element in the balance of payments called errors and omissions.

If India's current account balance is $-58$ million and the capital account balance is $62.5$ million. What will be the errors and omissions to have an overall balance in balance of payments?

$120.5$ million.

$-120.5$ million.

$-4.5$ million.

$4.5$ million.

Correct Answer

Option 3

Correct Answer

Explanation →

Q6:

3 June Shift 1

Macro > Balance of Payments

Hard

Chronologically arrange the following in sequence: (A) Smithsonian Agreement. (B) Gold standard system of exchange. (C) Gold was replaced by creating the Special Drawing Rights (SDR). (D) Bretton woods conference. Choose the correct answer from the options given below:

(B), (C), (A), (D)

(A), (B), (C), (D)

(B), (A), (D), (C)

(B), (D), (C), (A)

Correct Answer

Option 4

Correct Answer

Explanation →

Q7:

3 June Shift 1

Macro > Balance of Payments

Medium

Which of the following statements is true? If exchange rate changes from $1 = ₹85 to $1 = ₹90 (A) Imports will fall. (B) Imports will rise. (C) Exports will rise. (D) National income will rise. Choose the correct answer from the options given below:

(A), (C) and (D) only

(A), (B) and (D) only

(A), (B), (C) and (D)

(B), (C) and (D) only

Correct Answer

Option 1

Correct Answer

Explanation →

Q8:

3 June Shift 1

Macro > Balance of Payments

Easy

Under a flexible exchange rate, when the price of domestic currency in terms of foreign currency increases is called?

Depreciation of domestic currency.

Appreciation of domestic currency.

Devaluation of domestic currency.

Revaluation of domestic currency.

Correct Answer

Option 2

Correct Answer

Explanation →

Q9:

3 June Shift 1

Macro > Balance of Payments

Medium

Which of the following best defines 'Unilateral Transfers' in the context of international transactions?

Funds transferred internationally as loans for a specified tenure and interest rate.

Trade transactions involving goods and services between two countries.

Payments made by one party without expecting any return in the future.

Investments made by a country in the stock market of another country.

Correct Answer

Option 3

Correct Answer

Explanation →

Q10:

3 June Shift 1

Macro > Balance of Payments

Medium

The measurement of Balance of Payments deficit is based on ___________ transactions.

Accomodating

Autonomous

Current account

Capital account

Correct Answer

Option 2

Correct Answer

Explanation →

Q11:

2 June Shift 1

Macro > Balance of Payments

Medium

Identify the correct reasons that may affect the demand for foreign exchange in an economy. (A) Import of visibles. (B) Export of invisibles. (C) Remittances by residents working abroad. (D) Purchase of assets abroad. Choose the correct answer from the options given below:

(A) and (B) only

(B) and (C) only

(C) and (D) only

(A) and (D) only

Correct Answer

Option 4

Correct Answer

Explanation →

Q12:

2 June Shift 1

Macro > Balance of Payments

Medium

Which of the following statements is true about autonomous transactions?

BOP is said to be in surplus if autonomous receipts are greater than autonomous payments.

These are also known as below the line items.

These only occur in capital account of BOP.

These items are done to correct the imbalance of BOP.

Correct Answer

Option 1

Correct Answer

Explanation →

Q13:

2 June Shift 1

Macro > Balance of Payments

Medium

Arrange the following economic events in chronological order: (A) Gold was displaced by creating the Special Drawing Rights (SDRs). (B) The Great Depression. (C) First World War. (D) Bretton Woods Conference. Choose the correct answer from the options given below:

(A), (B), (C), (D)

(C), (B), (D), (A)

(B), (A), (D), (C)

(A), (B), (D), (C)

Correct Answer

Option 2

Correct Answer

Explanation →

Q14:

2 June Shift 1

Macro > Balance of Payments

Medium

Match List-I with List-II | List-I | List-II | |---|---| | (A) Exchange Rate | (I) Supply of foreign exchange = Demand of foreign currency. | | (B) Gold standard system of exchange rate | (II) Domestic currency loses its value in relation to a foreign currency. | | (C) Par rate of exchange | (III) External value of the domestic currency. | | (D) Currency Depreciation | (IV) An old variant of fixed exchange rate. | Choose the correct answer from the options given below:

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (II), (B) - (IV), (C) - (I), (D) - (III)

(A) - (IV), (B) - (I), (C) - (II), (D) - (III)

Correct Answer

Option 1

Correct Answer

Explanation →

Q15:

2 June Shift 1

Macro > Balance of Payments

Easy

Balance of Payments of an economy records.

Income and the expenditure of the government.

Inflow and outflow of the funds of the government.

Inflow and outflow of visible items into/ from the rest of the world.

Inflow/ outflow of foreign exchange to/ from the economy.

Correct Answer

Option 4

Correct Answer

Explanation →

Q16:

31 May Shift 1

Macro > Balance of Payments

Medium

Suppose, in a flexible exchange rate system, demand for foreign goods and services increases due to increased international travel by Indians. Arrange the following statements in correct sequence. (A) Exchange rate increases. (B) Exports from India become more affordable for foreigners. (C) India's income increases by keeping other factors constant. (D) The demand curve shifts towards the right. Choose the correct answer from the options given below: 1. (D), (B), (C), (A) 2. (D), (C), (B), (A) 3. (D), (A), (B), (C) 4. (D), (B), (A), (C)

(D), (B), (C), (A)

(D), (C), (B), (A)

(D), (A), (B), (C)

(D), (B), (A), (C)

Correct Answer

Option 3

Correct Answer

Explanation →

Q17:

31 May Shift 1

Macro > Balance of Payments

Medium

Which of the following are part of Capital account. (A) Foreign Direct Investment. (B) Offshore Funds. (C) Portfolio Investment. (D) Repayment of Loans. Choose the correct answer from the options given below: 1. (A), (B) and (D) only 2. (A), (B) and (C) only 3. (A), (B), (C) and (D) 4. (B), (C) and (D) only

(A), (B) and (D) only

(A), (B) and (C) only

(A), (B), (C) and (D)

(B), (C) and (D) only

Correct Answer

Option 3

Correct Answer

Explanation →

Q18:

31 May Shift 1

Macro > Balance of Payments

Medium

The Reserve Bank sells foreign exchange when there is a deficit. This move of RBI is known by which of the following? 1. Official reserve sale. 2. Balance of payments deficit. 3. Balance of payments surplus. 4. Balance of trade.

Official reserve sale.

Balance of payments deficit.

Balance of payments surplus.

Balance of trade.

Correct Answer

Option 1

Correct Answer

Explanation →

Q19:

31 May Shift 1

Macro > Balance of Payments

Medium

From the following statements choose the effects of devaluation of domestic currency. (A) Exchange rate is fixed. (B) Indian Government increases the exchange rate. (C) Domestic currency become cheaper. (D) The Exports of India will rise. Choose the correct answer from the options given below:

(A), (B), (D), (C).

(A), (B), (C), (D)

(B), (C), (A), (D)

(D), (B), (C), (A).

Correct Answer

Option 2

Correct Answer

Explanation →

Q20:

30 May Shift 2

Macro > Balance of Payments

Medium

Under this system, official reserve transactions are not equal to zero.

Fixed Exchange Rate.

Flexible Exchange Rate.

Managed Floating Exchange Rate.

Speculation.

Correct Answer

Option 3

Correct Answer

Explanation →

Q21:

30 May Shift 2

Macro > Balance of Payments

Medium

Arrange the following components as per the sample of Balance of Payments for India. (A) Trade Balance. (B) Net Invisibles. (C) Current Account Balance. (D) Errors and Omissions. Choose the correct answer from the options given below:

(A), (B), (C), (D)

(B), (A), (C), (D)

(B), (A), (D), (C)

(C), (B), (D), (A)

Correct Answer

Option 1

Correct Answer

Explanation →

Q22:

30 May Shift 2

Macro > Balance of Payments

Easy

Gifts, remittances and grants in current account are the components of ?

Transfer Payments.

Net Factor Income.

Trade in Goods.

Net Non-factor Income.

Correct Answer

Option 1

Correct Answer

Explanation →

Q23:

30 May Shift 2

Macro > Balance of Payments

Medium

In modern economies, countries interact through various channels, Which market is not an example of these linkages?

Output Market.

Money Market.

Financial Market.

Labour Market.

Correct Answer

Option 2

Correct Answer

Explanation →

Q24:

30 May Shift 1

Macro > Balance of Payments

Easy

Read the passage carefully and answer the question based on the passage: Balance of Payment is defined as the statement of accounts of a country's inflow and outflows of foreign exchange during a specified period of time. It consists of two main accounts, i.e. Current Account and Capital Account. A deficit or surplus in the current account is determined by the country's exports and imports, whereas the capital account records transactions involving non-financial and financial assets. India's BOP typically reflects its trade deficit, services surplus and capital inflows. To finance the deficit in its overall BOP, few transactions take place in its official reserves of foreign exchange.

What does capital account of BOP record?

Imports and exports of goods.

Transaction of capital and financial assets.

Income from investment.

Unilateral transfers.

Correct Answer

Option 2

Correct Answer

Explanation →

Q25:

30 May Shift 1

Macro > Balance of Payments

Medium

Read the passage carefully and answer the question based on the passage: Balance of Payment is defined as the statement of accounts of a country's inflow and outflows of foreign exchange during a specified period of time. It consists of two main accounts, i.e. Current Account and Capital Account. A deficit or surplus in the current account is determined by the country's exports and imports, whereas the capital account records transactions involving non-financial and financial assets. India's BOP typically reflects its trade deficit, services surplus and capital inflows. To finance the deficit in its overall BOP, few transactions take place in its official reserves of foreign exchange.

What is the role of official reserve account?

Records trade in goods.

Reflects errors in data.

Stabilize the currency and manage BOP imbalance.

Attracts foreign investment.

Correct Answer

Option 3

Correct Answer

Explanation →

Q26:

30 May Shift 1

Macro > Balance of Payments

Medium

Read the passage carefully and answer the question based on the passage: Balance of Payment is defined as the statement of accounts of a country's inflow and outflows of foreign exchange during a specified period of time. It consists of two main accounts, i.e. Current Account and Capital Account. A deficit or surplus in the current account is determined by the country's exports and imports, whereas the capital account records transactions involving non-financial and financial assets. India's BOP typically reflects its trade deficit, services surplus and capital inflows. To finance the deficit in its overall BOP, few transactions take place in its official reserves of foreign exchange.

What could persistent current account deficit lead to?

Currency appreciation.

Increased reserves.

Dependence on foreign borrowings.

Trade surplus.

Correct Answer

Option 3

Correct Answer

Explanation →

Q27:

30 May Shift 1

Macro > Balance of Payments

Medium

Read the passage carefully and answer the question based on the passage: Balance of Payment is defined as the statement of accounts of a country's inflow and outflows of foreign exchange during a specified period of time. It consists of two main accounts, i.e. Current Account and Capital Account. A deficit or surplus in the current account is determined by the country's exports and imports, whereas the capital account records transactions involving non-financial and financial assets. India's BOP typically reflects its trade deficit, services surplus and capital inflows. To finance the deficit in its overall BOP, few transactions take place in its official reserves of foreign exchange.

What does the BOP record?

Transactions within a country.

Transactions between two countries.

Economic transactions between residents of a country and rest of the world.

Transfers in goods only.

Correct Answer

Option 3

Correct Answer

Explanation →

Q28:

30 May Shift 1

Macro > Balance of Payments

Easy

Read the passage carefully and answer the question based on the passage: Balance of Payment is defined as the statement of accounts of a country's inflow and outflows of foreign exchange during a specified period of time. It consists of two main accounts, i.e. Current Account and Capital Account. A deficit or surplus in the current account is determined by the country's exports and imports, whereas the capital account records transactions involving non-financial and financial assets. India's BOP typically reflects its trade deficit, services surplus and capital inflows. To finance the deficit in its overall BOP, few transactions take place in its official reserves of foreign exchange.

How can a country reduce the BOP deficit?

Promoting exports and attracting investment.

Increasing imports.

Stopping trade with other countries.

Increasing domestic borrowings.

Correct Answer

Option 1

Correct Answer

Explanation →

Q29:

29 May Shift 2

Macro > Balance of Payments

Medium

Central banks intervene to buy and sell foreign currencies in an attempt to moderate exchange rate movements whenever they feel that such actions are appropriate. What is this move called?

Managed floating.

Official reserve transactions.

Balance of payments.

Autonomous and accommodating transactions.

Correct Answer

Option 1

Correct Answer

Explanation →

Q30:

29 May Shift 2

Macro > Balance of Payments

Medium

The cost of a bag increased from $8 to $12 in the US and ₹ 400 to ₹480 in India. What affect it has on the dollar in respect to exchange price?

Revaluated.

Appreciated.

Depreciated.

Devaluated.

Correct Answer

Option 3

Correct Answer

Explanation →

Q31:

29 May Shift 2

Macro > Balance of Payments

Medium

In the balance of payments, the transactions of bonds and equity shares are placed under which of the following account?

Trading Account.

Financial Account.

Current Account.

Errors and Omissions.

Correct Answer

Option 2

Correct Answer

Explanation →

Q32:

29 May Shift 2

Macro > Balance of Payments

Medium

If ₹150 is required to buy 2 Dollar, instead of ₹100 earlier, then: (A) Domestic currency has depreciated. (B) Domestic currency has appreciated. (C) The rupee value of the import bill will increase. (D) Selling foreign exchange from its reserves by the reserve bank of India. Choose the correct answer from the options given below:

(A), (B) and (D) only

(A), (C) and (D) only

(A), (B), (C) and (D)

(B), (C) and (D) only

Correct Answer

Option 2

Correct Answer

Explanation →

Q33:

29 May Shift 2

Macro > Balance of Payments

Medium

Choose the correct statements from the following in respect of exchange rate system. (A) Floating Exchange Rate exchange rate is determined by the market forces of demand and supply. (B) In a fixed exchange rate system, making domestic currency cheaper is called Devaluation. (C) Increase in exchange rate implies that the price of foreign currency has increased and is called depreciation. (D) Exchange rates between any two currencies adjust to reflect differences in the price levels in the two countries. Choose the correct answer from the options given below:

(A), (B) and (C) only

(A), (B) and (D) only

(B), (C) and (D) only

(A), (B), (C) and (D)

Correct Answer

Option 4

Correct Answer

Explanation →

Q34:

29 May Shift 1

Macro > Balance of Payments

Medium

Which of the following international transactions are meant to bridge the gap in BOP

Current Account transactions.

Autonomous Transactions.

Accomodating transactions.

All international transactions.

Correct Answer

Option 3

Correct Answer

Explanation →

Q35:

29 May Shift 1

Macro > Balance of Payments

Medium

When the exchange rate of foreign currency increases due to managed floating rate it is known as_______.

Devaluation.

Depriciation.

Appreciation.

Revaluation.

Correct Answer

Option 1

Correct Answer

Explanation →

Q36:

29 May Shift 1

Macro > Balance of Payments

Medium

Which is not a cause of disequilibrium in Balance of Payment?

Political instability.

Large Imports.

Low Domestic price.

Change in taste and Fashion.

Correct Answer

Option 3

Correct Answer

Explanation →

Q37:

29 May Shift 1

Macro > Balance of Payments

Medium

Which of the following transactions will be recorded in the current account of Balance of Payment?

Borrowings from abroad.

Investment to abroad.

Increase in Foreign Exchange reserves.

Factor Income receipt from abroad.

Correct Answer

Option 4

Correct Answer

Explanation →

Q38:

29 May Shift 1

Macro > Balance of Payments

Medium

Arrange the following in ascending order according to their year of implementation (A) The Smithsonian Agreement. (B) First World War. (C) Introduction of Liberalized Exchange Rate Management System. (D) The Bretton Woods Conference. Choose the correct answer from the options given below:

(B), (D), (A), (C)

(A), (C), (B), (D)

(B), (A), (D), (C)

(C), (B), (D), (A)

Correct Answer

Option 1

Correct Answer

Explanation →

Q39:

28 May Shift 2

Macro > Balance of Payments

Medium

The issue of currency's credibility and ensuring stability in international transactions, is handled by ............

International Monetary System.

International Monetary Fund.

Central Bank.

World Bank.

Correct Answer

Option 1

Correct Answer

Explanation →

Q40:

28 May Shift 2

Macro > Balance of Payments

Medium

Which system is prone to speculative attack on a currency?

Fixed Exchange Rate System.

Flexible Exchange Rate System.

Managed Floating system.

Fixed Floating System.

Correct Answer

Option 1

Correct Answer

Explanation →

Q41:

28 May Shift 2

Macro > Balance of Payments

Medium

When a government action increases the exchange rate, by making the domestic currency cheaper, it is called..........

Depreciation.

Devaluation.

Revaluation.

Appreciation.

Correct Answer

Option 2

Correct Answer

Explanation →

Q42:

28 May Shift 2

Macro > Balance of Payments

Medium

Arrange the given statement in terms of determining the ehange rate through a floating /flexible exchange rate. (A) Depreciation of domestic currency in terms of foreign currency. (B) The demand curve shifts upward and right to the original demand curve. (C) The demand for foreign goods and services increases. (D) The increase in demand for foreign goods and services result in a change in the exchange rate. Choose the correct answer from the options given below:

(B), (A), (C), (D)

(A), (B), (C), (D)

(B), (A), (D), (C)

(C), (B), (D), (A)

Correct Answer

Option 4

Correct Answer

Explanation →

Q43:

28 May Shift 1

Macro > Balance of Payments

Medium

It is difficult to record all international transactions accurately. Thus, there is a third element of Balance of Payment (BoP) (apart from the current and capital accounts) which adjusts inaccuracies to some extent that is called: 1. Reserves Change 2. Overall Balance 3. Errors and Omissions 4. Other Flows

Reserves Change

Overall Balance

Errors and Omissions

Other Flows

Correct Answer

Option 3

Correct Answer

Explanation →

Q44:

28 May Shift 1

Macro > Balance of Payments

Medium

Arrange the following in correct sequence with respect to exchnage rate :- (A) The central bank purchases dollars to absorb the excess supply. (B) The exchange rate is fixed by the government higher than the market rate of exchange. (C) The government wants to encourage exports. (D) Supply of the dollars exceeds the demand for the dollar. Choose the correct answer from the options given below: 1. (B), (A), (D), (C). 2. (D), (A), (C), (B). 3. (C), (A), (D), (B). 4. (C), (B), (D), (A).

(B), (A), (D), (C).

(D), (A), (C), (B).

(C), (A), (D), (B).

(C), (B), (D), (A).

Correct Answer

Option 4

Correct Answer

Explanation →

Q45:

28 May Shift 1

Macro > Balance of Payments

Easy

When income increases, consumer spending increases. Spending on imported goods is also likely to __________. 1. Decrease. 2. Constant. 3. Increase. 4. Maybe an increase or maybe decrease.

Decrease.

Constant.

Increase.

Maybe an increase or maybe decrease.

Correct Answer

Option 3

Correct Answer

Explanation →

Q46:

28 May Shift 1

Macro > Balance of Payments

Medium

Official reserve sale refers to 1. The reserve bank sells foreign exchange when there is a deficit. 2. The International Monetary Fund sells foreign exchange when there is a deficit. 3. Net consequences of autonomous transactions. 4. The agreement in which national currencies are traded for one another.

The reserve bank sells foreign exchange when there is a deficit.

The International Monetary Fund sells foreign exchange when there is a deficit.

Net consequences of autonomous transactions.

The agreement in which national currencies are traded for one another.

Correct Answer

Option 1

Correct Answer

Explanation →

Q47:

28 May Shift 1

Macro > Balance of Payments

Medium

Match the following: | List -I | List -II | |---|---| | (A) Direct Investment | (I) Bilateral Loans | | (B) Portfolio Investment | (II) Equity Capital | | (C) External Borrowing | (III) Off Shore Funds | | (D) External Assistance | (IV) Short Term Debt | Which of the following combination is a correct match of the above? 1. (A) - (I), (B) - (II), (C) - (IV), (D) - (III) 2. (A) - (I), (B) - (II), (C) - (III), (D) - (IV) 3. (A) - (II), (B) - (III), (C) - (IV), (D) - (I) 4. (A) - (III), (B) - (IV), (C) - (I), (D) - (II)

(A) - (I), (B) - (II), (C) - (IV), (D) - (III)

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (II), (B) - (III), (C) - (IV), (D) - (I)

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 3

Correct Answer

Explanation →

Q48:

28 May Shift 1

Macro > Balance of Payments

Medium

Comprehension: Read the given paragraph carefully and answer the following questions. Government Budget The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. The Indian economy has consolidated its post-Covid recovery with policymakers – fiscal and monetary – ensuring economic and financial stability. Nonetheless, change is the only constant for a country with high growth aspirations. For the recovery to be sustained, there has to be heavy lifting on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate. The headline inflation rate is largely under control, although the inflation rate for some specific food items is elevated. The trade deficit was lower in FY24 than in FY23, and the current account deficit for the year is around 0.7% of GDP. In fact, the current account registered a surplus in the last quarter of the financial year. Foreign exchange reserves are ample. Public investment has sustained capital formation in the last several years even as the private sector shed its balance sheet blues and began investing in FY22. Now, it has to receive the baton from the public sector and sustain the investment momentum in the economy. The signs are encouraging. National income data show that non-financial private-sector capital formation, measured in current prices, expanded vigorously.

With reference to the above passage, the current account comprises? 1. Exports and Imports of visible items only. 2. Exports and imports of visible and invisible items and external borrowings. 3. Exports and imports of goods & services plus transfer payments. 4. Short Term Debt.

Exports and Imports of visible items only.

Exports and imports of visible and invisible items and external borrowings.

Exports and imports of goods & services plus transfer payments.

Short Term Debt.

Correct Answer

Option 3

Correct Answer

Explanation →

Q49:

28 May Shift 1

Macro > Balance of Payments

Medium

Comprehension: Read the given paragraph carefully and answer the following questions. Government Budget The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. The Indian economy has consolidated its post-Covid recovery with policymakers – fiscal and monetary – ensuring economic and financial stability. Nonetheless, change is the only constant for a country with high growth aspirations. For the recovery to be sustained, there has to be heavy lifting on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate. The headline inflation rate is largely under control, although the inflation rate for some specific food items is elevated. The trade deficit was lower in FY24 than in FY23, and the current account deficit for the year is around 0.7% of GDP. In fact, the current account registered a surplus in the last quarter of the financial year. Foreign exchange reserves are ample. Public investment has sustained capital formation in the last several years even as the private sector shed its balance sheet blues and began investing in FY22. Now, it has to receive the baton from the public sector and sustain the investment momentum in the economy. The signs are encouraging. National income data show that non-financial private-sector capital formation, measured in current prices, expanded vigorously.

The headline inflation rate is largely under control, although the inflation rate for some specific food items is elevated. In the above statement, what is meant by control? 1. Within the range of the acceptable inflation rate. 2. Price rise of basic consumption item is not in control. 3. Price of items for daily consumption are growing in such a manner that they are manageable through implementing policy tools if need arises. 4. No price rise has been witnessed.

Within the range of the acceptable inflation rate.

Price rise of basic consumption item is not in control.

Price of items for daily consumption are growing in such a manner that they are manageable through implementing policy tools if need arises.

No price rise has been witnessed.

Correct Answer

Option 1

Correct Answer

Explanation →

Q50:

28 May Shift 1

Macro > Balance of Payments

Medium

Comprehension: Read the given paragraph carefully and answer the following questions. Government Budget The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. The Indian economy has consolidated its post-Covid recovery with policymakers – fiscal and monetary – ensuring economic and financial stability. Nonetheless, change is the only constant for a country with high growth aspirations. For the recovery to be sustained, there has to be heavy lifting on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate. The headline inflation rate is largely under control, although the inflation rate for some specific food items is elevated. The trade deficit was lower in FY24 than in FY23, and the current account deficit for the year is around 0.7% of GDP. In fact, the current account registered a surplus in the last quarter of the financial year. Foreign exchange reserves are ample. Public investment has sustained capital formation in the last several years even as the private sector shed its balance sheet blues and began investing in FY22. Now, it has to receive the baton from the public sector and sustain the investment momentum in the economy. The signs are encouraging. National income data show that non-financial private-sector capital formation, measured in current prices, expanded vigorously.

Which combination among the following represents a Geopolitical challenge in the economy. A. Rise in inflation due to war and other natural calamities. B. Fluctuation in economic benchmarks due to unstable government. C. Impacting Balance of Payment due to economic sanctions on a country. D. Failure of a firm led to a reduction in profit making. 1. (A), (C) and (D) only 2. (A), (B), (C) and (D) 3. (A), (B) and (C) only 4. (A) and (D) only

(A), (C) and (D) only

(A), (B), (C) and (D)

(A), (B) and (C) only

(A) and (D) only

Correct Answer

Option 3

Correct Answer

Explanation →

Q51:

28 May Shift 1

Macro > Balance of Payments

Medium

Comprehension: Read the given paragraph carefully and answer the following questions. Government Budget The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. The Indian economy has consolidated its post-Covid recovery with policymakers – fiscal and monetary – ensuring economic and financial stability. Nonetheless, change is the only constant for a country with high growth aspirations. For the recovery to be sustained, there has to be heavy lifting on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate. The headline inflation rate is largely under control, although the inflation rate for some specific food items is elevated. The trade deficit was lower in FY24 than in FY23, and the current account deficit for the year is around 0.7% of GDP. In fact, the current account registered a surplus in the last quarter of the financial year. Foreign exchange reserves are ample. Public investment has sustained capital formation in the last several years even as the private sector shed its balance sheet blues and began investing in FY22. Now, it has to receive the baton from the public sector and sustain the investment momentum in the economy. The signs are encouraging. National income data show that non-financial private-sector capital formation, measured in current prices, expanded vigorously.

Foreign exchange reserves are ample, means? 1. Reserve is sufficient to purchase goods and services from abroad. 2. Anticipated demand for foreign goods and services can be met through incumbent foreign exchange reserve. 3. Supply of foreign reserves is more than demand of foreign reserves. 4. Government is confident about present and future need of foreign reserve.

Reserve is sufficient to purchase goods and services from abroad.

Anticipated demand for foreign goods and services can be met through incumbent foreign exchange reserve.

Supply of foreign reserves is more than demand of foreign reserves.

Government is confident about present and future need of foreign reserve.

Correct Answer

Option 2

Correct Answer

Explanation →

Q52:

28 May Shift 1

Macro > Balance of Payments

Easy

Comprehension: Read the given paragraph carefully and answer the following questions. Government Budget The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. The Indian economy has consolidated its post-Covid recovery with policymakers – fiscal and monetary – ensuring economic and financial stability. Nonetheless, change is the only constant for a country with high growth aspirations. For the recovery to be sustained, there has to be heavy lifting on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate. The headline inflation rate is largely under control, although the inflation rate for some specific food items is elevated. The trade deficit was lower in FY24 than in FY23, and the current account deficit for the year is around 0.7% of GDP. In fact, the current account registered a surplus in the last quarter of the financial year. Foreign exchange reserves are ample. Public investment has sustained capital formation in the last several years even as the private sector shed its balance sheet blues and began investing in FY22. Now, it has to receive the baton from the public sector and sustain the investment momentum in the economy. The signs are encouraging. National income data show that non-financial private-sector capital formation, measured in current prices, expanded vigorously.

Trade deficits occur when

Export = Import

Export > Import

Export < Import

Export- (Import + external borrowing) = 0

Correct Answer

Option 3

Correct Answer

Explanation →

Q53:

27 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: Read the passage carefully and answer the questions based on the passage: The Foreign Exchange Market Let us assume that a single Indian resident wants to visit London on a vacation (an import of tourist services). She will have to pay in pounds for her stay there. She will need to know where to obtain the pounds and at what price, this price is known as the exchange rate. Foreign Exchange Rate (also called Forex Rate) is the price of one currency in terms of another. It links the currencies of different countries and enables comparison of international costs and prices. For example, if we have to pay Rs 50 for $1 then the exchange rate is Rs 50 per dollar. The market in which national currencies are traded for one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorised dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centres , the market itself is world-wide. There is a close and continuous contact between the trading centres and the participants dealing in more than one market.

Which among the following is not a direct participant in the foreign exchange market?

Resident dealers.

Foreign exchange dealers.

Monetary authorities.

Commercial banks.

Correct Answer

Option 1

Correct Answer

Explanation →

Q54:

27 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: Read the passage carefully and answer the questions based on the passage: The Foreign Exchange Market Let us assume that a single Indian resident wants to visit London on a vacation (an import of tourist services). She will have to pay in pounds for her stay there. She will need to know where to obtain the pounds and at what price, this price is known as the exchange rate. Foreign Exchange Rate (also called Forex Rate) is the price of one currency in terms of another. It links the currencies of different countries and enables comparison of international costs and prices. For example, if we have to pay Rs 50 for $1 then the exchange rate is Rs 50 per dollar. The market in which national currencies are traded for one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorised dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centres , the market itself is world-wide. There is a close and continuous contact between the trading centres and the participants dealing in more than one market.

...... in which national currencies are traded for one another.

Foreign exchange rate.

Foreign trade.

Trading centres.

Foreign exchange market.

Correct Answer

Option 4

Correct Answer

Explanation →

Q55:

27 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: Read the passage carefully and answer the questions based on the passage: The Foreign Exchange Market Let us assume that a single Indian resident wants to visit London on a vacation (an import of tourist services). She will have to pay in pounds for her stay there. She will need to know where to obtain the pounds and at what price, this price is known as the exchange rate. Foreign Exchange Rate (also called Forex Rate) is the price of one currency in terms of another. It links the currencies of different countries and enables comparison of international costs and prices. For example, if we have to pay Rs 50 for $1 then the exchange rate is Rs 50 per dollar. The market in which national currencies are traded for one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorised dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centres , the market itself is world-wide. There is a close and continuous contact between the trading centres and the participants dealing in more than one market.

...... links the currencies of different countries and enables comparison of international costs and prices.

Commercial banks.

Foreign Exchange Rate.

Foreign Exchange Market.

Monetary authorities.

Correct Answer

Option 2

Correct Answer

Explanation →

Q56:

27 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: Read the passage carefully and answer the questions based on the passage: The Foreign Exchange Market Let us assume that a single Indian resident wants to visit London on a vacation (an import of tourist services). She will have to pay in pounds for her stay there. She will need to know where to obtain the pounds and at what price, this price is known as the exchange rate. Foreign Exchange Rate (also called Forex Rate) is the price of one currency in terms of another. It links the currencies of different countries and enables comparison of international costs and prices. For example, if we have to pay Rs 50 for $1 then the exchange rate is Rs 50 per dollar. The market in which national currencies are traded for one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorised dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centres , the market itself is world-wide. There is a close and continuous contact between the trading centres and the participants dealing in more than one market.

If a British resident wants to visit India on a vacation he will have to pay in ......

Rupees for his stay.

Dollars for his stay.

Pounds for his stay.

Euros for his stay.

Correct Answer

Option 1

Correct Answer

Explanation →

Q57:

27 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: Read the passage carefully and answer the questions based on the passage: The Foreign Exchange Market Let us assume that a single Indian resident wants to visit London on a vacation (an import of tourist services). She will have to pay in pounds for her stay there. She will need to know where to obtain the pounds and at what price, this price is known as the exchange rate. Foreign Exchange Rate (also called Forex Rate) is the price of one currency in terms of another. It links the currencies of different countries and enables comparison of international costs and prices. For example, if we have to pay Rs 50 for $1 then the exchange rate is Rs 50 per dollar. The market in which national currencies are traded for one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorised dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centres , the market itself is world-wide. There is a close and continuous contact between the trading centres and the participants dealing in more than one market.

If we have to pay Rs 150 for 3 pounds, then the exchange rate is Rs........... per pound.

Rs. 150

Rs. 100

Rs. 3

Rs. 50

Correct Answer

Option 4

Correct Answer

Explanation →

Q58:

26 May Shift 2

Macro > Balance of Payments

Medium

Comprehension: Read the passage carefully and answer the questions based on the passage: Income and the Exchange Rate When income of a country increases, consumer spending increases. Spending on imported goods is also likely to increase. When imports increase, the demand curve for foreign exchange shifts to the right. There is a depreciation of the domestic currency. If there is an increase in income abroad as well, domestic exports will rise and the supply curve of foreign exchange shifts outward. On balance, the domestic currency may or may not depreciate. What happens will depend on whether exports are growing faster than imports. In general, other things remaining equal, a country whose aggregate demand grows faster than the rest of the world’s normally finds its currency depreciating because its imports grow faster than its exports. Its demand curve for foreign currency shifts faster than its supply curve.

If the volume of imports of a country are growing faster than its volume of exports, its gross domestic product _______.

Will Fall.

Will Rise.

Remains unaffected.

May rise or fall.

Correct Answer

Option 1

Correct Answer

Explanation →

Q59:

26 May Shift 2

Macro > Balance of Payments

Medium

Comprehension: Read the passage carefully and answer the questions based on the passage: Income and the Exchange Rate When income of a country increases, consumer spending increases. Spending on imported goods is also likely to increase. When imports increase, the demand curve for foreign exchange shifts to the right. There is a depreciation of the domestic currency. If there is an increase in income abroad as well, domestic exports will rise and the supply curve of foreign exchange shifts outward. On balance, the domestic currency may or may not depreciate. What happens will depend on whether exports are growing faster than imports. In general, other things remaining equal, a country whose aggregate demand grows faster than the rest of the world’s normally finds its currency depreciating because its imports grow faster than its exports. Its demand curve for foreign currency shifts faster than its supply curve.

Other things remaining same, if the income abroad increases, what is the likely effect of the same on national income of the domestic economy?

National income is likely to fall.

National income is likely to rise.

National income will remain unaffected.

National income will initially fall and then rise.

Correct Answer

Option 2

Correct Answer

Explanation →

Q60:

26 May Shift 2

Macro > Balance of Payments

Medium

Comprehension: Read the passage carefully and answer the questions based on the passage: Income and the Exchange Rate When income of a country increases, consumer spending increases. Spending on imported goods is also likely to increase. When imports increase, the demand curve for foreign exchange shifts to the right. There is a depreciation of the domestic currency. If there is an increase in income abroad as well, domestic exports will rise and the supply curve of foreign exchange shifts outward. On balance, the domestic currency may or may not depreciate. What happens will depend on whether exports are growing faster than imports. In general, other things remaining equal, a country whose aggregate demand grows faster than the rest of the world’s normally finds its currency depreciating because its imports grow faster than its exports. Its demand curve for foreign currency shifts faster than its supply curve.

A decrease in income of a country leads to?

Leftward shift in the demand curve of foreign exchange.

Rightward sift in the demand curve of the foreign exchange.

Depreciation of domestic currency.

Appreciation of foreign currency.

Correct Answer

Option 1

Correct Answer

Explanation →

Q61:

26 May Shift 2

Macro > Balance of Payments

Medium

Comprehension: Read the passage carefully and answer the questions based on the passage: Income and the Exchange Rate When income of a country increases, consumer spending increases. Spending on imported goods is also likely to increase. When imports increase, the demand curve for foreign exchange shifts to the right. There is a depreciation of the domestic currency. If there is an increase in income abroad as well, domestic exports will rise and the supply curve of foreign exchange shifts outward. On balance, the domestic currency may or may not depreciate. What happens will depend on whether exports are growing faster than imports. In general, other things remaining equal, a country whose aggregate demand grows faster than the rest of the world’s normally finds its currency depreciating because its imports grow faster than its exports. Its demand curve for foreign currency shifts faster than its supply curve.

A country whose aggregate demand grows faster than the rest of the world's normally finds its currency______.

Appreciating.

Depreciating.

Initially appreciating and then depreciating.

Initially depreciating and then appreciating.

Correct Answer

Option 2

Correct Answer

Explanation →

Q62:

26 May Shift 2

Macro > Balance of Payments

Medium

Comprehension: Read the passage carefully and answer the questions based on the passage: Income and the Exchange Rate When income of a country increases, consumer spending increases. Spending on imported goods is also likely to increase. When imports increase, the demand curve for foreign exchange shifts to the right. There is a depreciation of the domestic currency. If there is an increase in income abroad as well, domestic exports will rise and the supply curve of foreign exchange shifts outward. On balance, the domestic currency may or may not depreciate. What happens will depend on whether exports are growing faster than imports. In general, other things remaining equal, a country whose aggregate demand grows faster than the rest of the world’s normally finds its currency depreciating because its imports grow faster than its exports. Its demand curve for foreign currency shifts faster than its supply curve.

If the income of the country and income abroad increase simultaneously, then the domestic currency will.............

Depciates.

Appreciates.

May or may not depreciate.

Initially appreciates and then depreciate.

Correct Answer

Option 3

Correct Answer

Explanation →

Q63:

22 May Shift 2

Macro > Balance of Payments

Medium

Which of the following will not lead to flow of foreign currency into the home country.

Exports by a country lead to the purchase of its domestic goods and services by the foreigners.

Peope want to purchase goods and services from other countries.

Foreigners send gifts or make transfers.

The assets of a home country are bought by the foreigners.

Correct Answer

Option 2

Correct Answer

Explanation →

Q64:

22 May Shift 2

Macro > Balance of Payments

Medium

Identify the exchange rate system in which central bank of a country intervene to buy and sell foreign currencies in an attempt to moderate exchange rate movements whenever they feel that such actions are appropriate.

Moderate floating.

Dirty floating.

Flexible exchange rate.

Fixed exchange rate.

Correct Answer

Option 2

Correct Answer

Explanation →

Q65:

22 May Shift 2

Macro > Balance of Payments

Medium

Arrange the following statements related to foreign exchange market (fixed exchange rate) in correct sequence. (A) RBI intervenes to purchase the dollars for rupees in the foreign exchange market in order to absorb this excess supply. (B) The government will fix a higher exchange rate by making the rupee cheaper for foreigners. (C) Supply of dollars exceeds the demand for dollars. (D) The Indian government wants to encourage exports. Choose the correct answer from the options given below:

(D), (B), (C), (A)

(A), (C), (B), (D)

(B), (A), (D), (C)

(C), (B), (D), (A)

Correct Answer

Option 1

Correct Answer

Explanation →

Q66:

22 May Shift 2

Macro > Balance of Payments

Medium

When the income of domestic consumers increases, their spending will Increase and thus spending on imported goods is also likely to increase. This leads to ............... of domestic currency?

Revaluation.

Appreciation.

Depreciation.

Devaluation.

Correct Answer

Option 3

Correct Answer

Explanation →

Q67:

22 May Shift 2

Macro > Balance of Payments

Easy

The balance of payments records the transactions in goods, services and assets between residents of a country with the rest of the world for a specified time period. Identify the main accounts in the balance of payments.

Current account and Fixed account.

Capital account and fixed account.

Budget account and Flexible account.

Current account and capital account.

Correct Answer

Option 4

Correct Answer

Explanation →

Q68:

22 May Shift 1

Macro > Balance of Payments

Medium

International economic transactions are called ....... when transactions are made due to some reason other than to bridge the gap in the balance of payments, that is when they are independent of the state of balance of payments.

Errors and omissions.

Accommodating transactions.

Autonomous transactions.

Official reserve sale.

Correct Answer

Option 3

Correct Answer

Explanation →

Q69:

22 May Shift 1

Macro > Balance of Payments

Medium

For example, there is an increase in international travel by Indians. What will be the effect on the domestic currency? (A). Demand curve shifts upward and right to the original demand curve. (B). Demand for foreign goods and services increases. (C). Depreciation of domestic currency (rupees) in terms of foreign currency (dollars). (D). The value of rupees in terms of dollars has fallen and value of dollar in terms of rupees has risen. Choose the correct answer from the options given below:

(A), (B), (C), (D)

(A), (C), (B), (D)

(B), (A), (D), (C)

(C), (B), (D), (A)

Correct Answer

Option 3

Correct Answer

Explanation →

Q70:

22 May Shift 1

Macro > Balance of Payments

Easy

Exchange rate determined by the market forces of demand and supply is also known as...

Fixed Exchange Rate.

Floating Exchange Rate.

Managed Floating Exchange Rate.

Foreign Exchange Rate.

Correct Answer

Option 2

Correct Answer

Explanation →

Q71:

22 May Shift 1

Macro > Balance of Payments

Medium

The current account is the record of trade in goods and services and transfer payments. Arrange the following components in terms of service. (A). Current account. (B). Net factor income + Net Non-factor income. (C). Net investment income + Net income from compensation of employees. (D). Trade in services. Choose the correct answer from the options given below:

(A), (B), (C), (D)

(A), (C), (B), (D)

(B), (A), (D), (C)

(A), (D), (B), (C)

Correct Answer

Option 4

Correct Answer

Explanation →

Q72:

21 May Shift 1

Macro > Balance of Payments

Medium

Under __________ system, the central bank intervenes to buy and sell foreign currencies in an attempt to moderate exchange rate movements whenever they feel that such actions are appropriate.

Fixed exchange rate.

Flexible exchange rate.

Managed floating.

Gold Standard.

Correct Answer

Option 3

Correct Answer

Explanation →

Q73:

21 May Shift 1

Macro > Balance of Payments

Medium

Suppose that government bonds in country A pay 8 per cent rate of interest whereas equally safe bonds in country B yield 10 per cent. The interest rate differential is 2 per cent. Arrange the consequences of the same in sequential order. (A) People will find investing in country B more attractive and will therefore demand less of country A's currency. (B) Depreciation of country A's currency and an appreciation of country B's currency. (C) Investors from country A will be attracted by the high interest rates in country B and will buy the currency of country B selling currency of country A. (D) The demand curve for country A's currency will shift to the left and the supply curve will shift to the right. Choose the correct answer from the options given below:

(C), (A), (D), (B)

(B), (C), (A), (D)

(B), (A), (D), (C)

(C), (B), (D), (A)

Correct Answer

Option 1

Correct Answer

Explanation →

Q74:

21 May Shift 1

Macro > Balance of Payments

Medium

Which of the following items will be recorded in the capital account of the Balance of Payments account?

Net investment income.

Gifts, grants and remittances.

Net income from compensation of employees.

Offshore funds.

Correct Answer

Option 4

Correct Answer

Explanation →

Q75:

21 May Shift 1

Macro > Balance of Payments

Medium

Under the fixed exchange rate regime, if the government of a country finds its currency to be overvalued and therefore deliberately reduces the value of its current against the foreign currency, it will be called as?

Depreciation of domestic currency.

Appreciation of domestic currency.

Devaluation of domestic currency.

Revaluation of domestic currency.

Correct Answer

Option 3

Correct Answer

Explanation →

Q76:

21 May Shift 1

Macro > Balance of Payments

Medium

The Indian government imports 22 Rafael planes from France. In which sub-account and on which side of the Balance of Payments account this transaction will be recorded?

Current account on the debit side.

Current account on the credit side.

Capital account on the debit side.

Capital account on the credit side.

Correct Answer

Option 1

Correct Answer

Explanation →

Q77:

16 May Shift 1

Macro > Balance of Payments

Medium

**Autonomous and Accommodating Transactions** International economic transactions are called autonomous when transactions are made due to some reason other than to bridge the gap in the balance of payments, that is, when they are independent of the state of BoP. One reason could be to earn profit. These items are called 'above the line' items in the BoP. The balance of payments is said to be in surplus (deficit) if autonomous receipts are greater (less) than autonomous payments. Accommodating transactions (termed 'below the line' items), on the other hand, are determined by the gap in the balance of payments, that is, whether there is a deficit or surplus in the balance of payments. In other words, they are determined by the net consequences of the autonomous transactions. Since the official reserve transactions are made to bridge the gap in the BoP, they are seen as the accommodating item in the BoP.

Which of the following is not an autonomous transaction of the balance of payments?

External commercial borrowings

Exports

Official reserve transactions

Foreign direct investment

Correct Answer

Option 3

Correct Answer

Explanation →

Q78:

16 May Shift 1

Macro > Balance of Payments

Medium

**Autonomous and Accommodating Transactions** International economic transactions are called autonomous when transactions are made due to some reason other than to bridge the gap in the balance of payments, that is, when they are independent of the state of BoP. One reason could be to earn profit. These items are called 'above the line' items in the BoP. The balance of payments is said to be in surplus (deficit) if autonomous receipts are greater (less) than autonomous payments. Accommodating transactions (termed 'below the line' items), on the other hand, are determined by the gap in the balance of payments, that is, whether there is a deficit or surplus in the balance of payments. In other words, they are determined by the net consequences of the autonomous transactions. Since the official reserve transactions are made to bridge the gap in the BoP, they are seen as the accommodating item in the BoP.

Suppose the central bank of an economy records a net increase in the foreign exchange reserves for a given quarter. How will this be reflected in the balance of payments account of this economy?

current account, debit side

current account, credit side

capital account, debit side

capital account, credit side

Correct Answer

Option 3

Correct Answer

Explanation →

Q79:

16 May Shift 1

Macro > Balance of Payments

Medium

**Autonomous and Accommodating Transactions** International economic transactions are called autonomous when transactions are made due to some reason other than to bridge the gap in the balance of payments, that is, when they are independent of the state of BoP. One reason could be to earn profit. These items are called 'above the line' items in the BoP. The balance of payments is said to be in surplus (deficit) if autonomous receipts are greater (less) than autonomous payments. Accommodating transactions (termed 'below the line' items), on the other hand, are determined by the gap in the balance of payments, that is, whether there is a deficit or surplus in the balance of payments. In other words, they are determined by the net consequences of the autonomous transactions. Since the official reserve transactions are made to bridge the gap in the BoP, they are seen as the accommodating item in the BoP.

Balance of payments of an economy is in surplus when__________

Autonomous receipts > Accommodating receipts

accommodating receipts > accommodating payments

total international receipts > total international payments

autonomous receipts > autonomous payments

Correct Answer

Option 4

Correct Answer

Explanation →

Q80:

16 May Shift 1

Macro > Balance of Payments

Medium

**Autonomous and Accommodating Transactions** International economic transactions are called autonomous when transactions are made due to some reason other than to bridge the gap in the balance of payments, that is, when they are independent of the state of BoP. One reason could be to earn profit. These items are called 'above the line' items in the BoP. The balance of payments is said to be in surplus (deficit) if autonomous receipts are greater (less) than autonomous payments. Accommodating transactions (termed 'below the line' items), on the other hand, are determined by the gap in the balance of payments, that is, whether there is a deficit or surplus in the balance of payments. In other words, they are determined by the net consequences of the autonomous transactions. Since the official reserve transactions are made to bridge the gap in the BoP, they are seen as the accommodating item in the BoP.

In a situation of Balance of payments deficit, which of the following will be true?

Official reserves will increase

Official reserves will fall.

Official reserves will not be affected.

There will be an increase in international lending of the economy.

Correct Answer

Option 2

Correct Answer

Explanation →

Q81:

16 May Shift 1

Macro > Balance of Payments

Medium

**Autonomous and Accommodating Transactions** International economic transactions are called autonomous when transactions are made due to some reason other than to bridge the gap in the balance of payments, that is, when they are independent of the state of BoP. One reason could be to earn profit. These items are called 'above the line' items in the BoP. The balance of payments is said to be in surplus (deficit) if autonomous receipts are greater (less) than autonomous payments. Accommodating transactions (termed 'below the line' items), on the other hand, are determined by the gap in the balance of payments, that is, whether there is a deficit or surplus in the balance of payments. In other words, they are determined by the net consequences of the autonomous transactions. Since the official reserve transactions are made to bridge the gap in the BoP, they are seen as the accommodating item in the BoP.

Which of the following is incorrect about accommodating transactions of the BoP?

They are termed 'below the line' items.

These are determined by the gap in the balance of payments.

They are independent of the state of BoP.

They are made to bridge the gap in the BoP.

Correct Answer

Option 3

Correct Answer

Explanation →

Q82:

15 May Shift 1

Macro > Balance of Payments

Medium

Identify the correct statement from the following.

A balance of trade surplus always implies a balance of payments surplus.

Balance of current account is always greater than balance of trade.

A balance of payments deficit implies a current account surplus.

Any current account deficit must be financed by a capital account surplus.

Correct Answer

Option 4

Correct Answer

Explanation →

Q83:

15 May Shift 1

Macro > Balance of Payments

Medium

Which of the following is a component of the capital account?

Export of merchandise.

Remittances received from Japan.

Purchase of IT services from the USA.

Purchase of shares of a foreign company by an Indian resident.

Correct Answer

Option 4

Correct Answer

Explanation →

Q84:

15 May Shift 1

Macro > Balance of Payments

Hard

"GST has improved India's ranking in terms of ease of doing business. The introduction of GST has attracted foreign investors in large numbers." What will be the sequential impact of the above on the exchange rate of the rupee in the international money market? (A) The supply curve of foreign exchange shifts to the right. (B) The exchange rate starts falling. (C) There is an appreciation of the rupee on the international money market. (D) An increase in foreign investment increases the supply of foreign exchange. Choose the correct answer from the options given below:

(A), (B), (C), (D)

(D), (C), (B), (A)

(D), (A), (B), (C)

(C), (B), (D), (A)

Correct Answer

Option 3

Correct Answer

Explanation →

Q85:

15 May Shift 1

Macro > Balance of Payments

Medium

Which of the following is not a merit of the flexible exchange rate system?

Exchange rates are prone to speculative attack on a currency.

Movements in the exchange rate automatically take care of the surpluses and deficits in the BoP.

Countries gain independence in conducting their monetary policies.

Large stocks of foreign exchange reserves are not required.

Correct Answer

Option 1

Correct Answer

Explanation →

Q86:

15 May Shift 1

Macro > Balance of Payments

Medium

Which of the following is not a source of demand for foreign exchange in India?

Indian investors investing abroad.

Foreign direct investment from abroad.

Import of machines from abroad.

Repayment of loans.

Correct Answer

Option 2

Correct Answer

Explanation →

Q87:

14 May Shift 1

Macro > Balance of Payments

Easy

If the current exchange rate is Rs. 80 to a pound and investors believe that the pound is going to appreciate by the end of the month and will be worth Rs.85, investors think if they gave the dealer Rs. 80,000 and bought 1000 pounds, at the end of the month, they would be able to exchange the pounds for Rs. 85,000, thus making a profit of ......

Rs. 5,000

Rs. 1,000

Rs. 85,000

Rs. 80,000

Correct Answer

Option 1

Correct Answer

Explanation →

Q88:

14 May Shift 1

Macro > Balance of Payments

Medium

Match List-I with List-II | List–I | List–II | | ---------------- | ---------------------------------------------------------------------- | | (A) Devaluation | (I) Price of foreign currency in terms of domestic currency increase | | (B) Revaluation | (II) Price of domestic currency in terms of foreign currency increases | | (C) Depreciation | (III) Increase the exchange rate by the action of the Government | | (D) Appreciation | (IV) Decreases the exchange rate by the action of the Government | Choose the correct answer from the options given below:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (I), (B) - (III), (C) - (II), (D) - (IV)

(A) - (I), (B) - (II), (C) - (IV), (D) - (III)

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 4

Correct Answer

Explanation →

Q89:

14 May Shift 1

Macro > Balance of Payments

Medium

Which of the following are called 'above the line' in the balance of payments? 1. International Transactions 2. Errors and Omissions 3. Accommodating Transactions 4. Autonomous Transactions

International Transactions

Errors and Omissions

Accommodating Transactions

Autonomous Transactions

Correct Answer

Option 4

Correct Answer

Explanation →

Q90:

14 May Shift 1

Macro > Balance of Payments

Medium

Which of the following is not an example of Net Invisible items? 1. Banking 2. Shipping 3. Machinery 4. Tourism

Banking

Shipping

Machinery

Tourism

Correct Answer

Option 3

Correct Answer

Explanation →

Q91:

13 May Shift 2

Macro > Balance of Payments

Medium

Match List-I with List-II | List-I | List-II | |---|---| | (A) Current Account | (I) Receipts < Payments | | (B) Capital Account | (II) Net Investment Income. | | (C) Current Account Deficit | (III) Transfer Payment | | (D) Trade in Services | (IV) Portfolio Investment | Choose the correct answer from the options given below:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (I), (B) - (III), (C) - (II), (D) - (IV)

(A) - (I), (B) - (II), (C) - (IV), (D) - (III)

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 4

Correct Answer

Explanation →

Q92:

13 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: THE FOREIGN EXCHANGE MARKET The market in which national currencies are traded with one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorized dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centers, the market itself is world-wide. There is close and continuous contact between the trading centers and the participants deal in more than one market. Foreign currency flows into the home country for the following reasons: exports by a country lead to the purchase of its domestic goods and services by foreigners; foreigners send gifts or make transfers; and, the assets of a home country are bought by foreigners. A rise in the price of foreign exchange will reduce foreigners’ costs while purchasing products from India and other things will remain constant. This increases India’s exports and hence the supply of foreign exchange may increase. Different countries have different methods of determining their currency’s exchange rate. It can be determined through Flexible Exchange Rate, Fixed Exchange Rate or Managed Floating Exchange Rate. Floating exchange rate is determined by the market forces of demand and supply. Where fixed exchange rate is determined by the government at a particular level. In floating exchange rate increasing value of currency is known as appreciation and a decreasing value is known as devaluation where in fix exchange rate decreased value is known as devaluation. Managed floating exchange rate is combination of flexible and fixed exchange rate where at certain movement central intervene through market operation to manage currency exchange rate.

An increase in exchange rate implies that the price of foreign currency in terms of domestic currency has increased; this is called ........

Appreciation of the domestic currency.

Devaluation of domestic currency.

Depreciation of domestic currency.

Dirty floating.

Correct Answer

Option 3

Correct Answer

Explanation →

Q93:

13 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: THE FOREIGN EXCHANGE MARKET The market in which national currencies are traded with one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorized dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centers, the market itself is world-wide. There is close and continuous contact between the trading centers and the participants deal in more than one market. Foreign currency flows into the home country for the following reasons: exports by a country lead to the purchase of its domestic goods and services by foreigners; foreigners send gifts or make transfers; and, the assets of a home country are bought by foreigners. A rise in the price of foreign exchange will reduce foreigners’ costs while purchasing products from India and other things will remain constant. This increases India’s exports and hence the supply of foreign exchange may increase. Different countries have different methods of determining their currency’s exchange rate. It can be determined through Flexible Exchange Rate, Fixed Exchange Rate or Managed Floating Exchange Rate. Floating exchange rate is determined by the market forces of demand and supply. Where fixed exchange rate is determined by the government at a particular level. In floating exchange rate increasing value of currency is known as appreciation and a decreasing value is known as devaluation where in fix exchange rate decreased value is known as devaluation. Managed floating exchange rate is combination of flexible and fixed exchange rate where at certain movement central intervene through market operation to manage currency exchange rate.

When the central bank intervenes to control the exchange rate through sell/purchase of foreign currencies, this process is called______

Managed Floating exchange rate.

Flexible Exchange rate.

Fixed Exchange rate.

Open market operation.

Correct Answer

Option 1

Correct Answer

Explanation →

Q94:

13 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: THE FOREIGN EXCHANGE MARKET The market in which national currencies are traded with one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorized dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centers, the market itself is world-wide. There is close and continuous contact between the trading centers and the participants deal in more than one market. Foreign currency flows into the home country for the following reasons: exports by a country lead to the purchase of its domestic goods and services by foreigners; foreigners send gifts or make transfers; and, the assets of a home country are bought by foreigners. A rise in the price of foreign exchange will reduce foreigners’ costs while purchasing products from India and other things will remain constant. This increases India’s exports and hence the supply of foreign exchange may increase. Different countries have different methods of determining their currency’s exchange rate. It can be determined through Flexible Exchange Rate, Fixed Exchange Rate or Managed Floating Exchange Rate. Floating exchange rate is determined by the market forces of demand and supply. Where fixed exchange rate is determined by the government at a particular level. In floating exchange rate increasing value of currency is known as appreciation and a decreasing value is known as devaluation where in fix exchange rate decreased value is known as devaluation. Managed floating exchange rate is combination of flexible and fixed exchange rate where at certain movement central intervene through market operation to manage currency exchange rate.

In an economy, to control a high balance of payment problem if government decided to reduce its currency value against globally accepted foreign currency, this process this known as:

Appreciation of Domestic currency.

Depreciation of Domestic currency.

Dirty Floating.

Devaluation of Domestic Currency.

Correct Answer

Option 4

Correct Answer

Explanation →

Q95:

13 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: THE FOREIGN EXCHANGE MARKET The market in which national currencies are traded with one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorized dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centers, the market itself is world-wide. There is close and continuous contact between the trading centers and the participants deal in more than one market. Foreign currency flows into the home country for the following reasons: exports by a country lead to the purchase of its domestic goods and services by foreigners; foreigners send gifts or make transfers; and, the assets of a home country are bought by foreigners. A rise in the price of foreign exchange will reduce foreigners’ costs while purchasing products from India and other things will remain constant. This increases India’s exports and hence the supply of foreign exchange may increase. Different countries have different methods of determining their currency’s exchange rate. It can be determined through Flexible Exchange Rate, Fixed Exchange Rate or Managed Floating Exchange Rate. Floating exchange rate is determined by the market forces of demand and supply. Where fixed exchange rate is determined by the government at a particular level. In floating exchange rate increasing value of currency is known as appreciation and a decreasing value is known as devaluation where in fix exchange rate decreased value is known as devaluation. Managed floating exchange rate is combination of flexible and fixed exchange rate where at certain movement central intervene through market operation to manage currency exchange rate.

When income increases and due to increase in income the demand for foreign goods increases then in this scenario what impact does economy face on foreign exchange rate ?

Appreciation of domestic currency.

Devaluation of domestic currency.

No change in domestic currency rate.

Depreciation of domestic currency.

Correct Answer

Option 4

Correct Answer

Explanation →

Q96:

13 May Shift 2

Macro > Balance of Payments

Easy

Comprehension: THE FOREIGN EXCHANGE MARKET The market in which national currencies are traded with one another is known as the foreign exchange market. The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorized dealers and monetary authorities. It is important to note that although participants themselves may have their own trading centers, the market itself is world-wide. There is close and continuous contact between the trading centers and the participants deal in more than one market. Foreign currency flows into the home country for the following reasons: exports by a country lead to the purchase of its domestic goods and services by foreigners; foreigners send gifts or make transfers; and, the assets of a home country are bought by foreigners. A rise in the price of foreign exchange will reduce foreigners’ costs while purchasing products from India and other things will remain constant. This increases India’s exports and hence the supply of foreign exchange may increase. Different countries have different methods of determining their currency’s exchange rate. It can be determined through Flexible Exchange Rate, Fixed Exchange Rate or Managed Floating Exchange Rate. Floating exchange rate is determined by the market forces of demand and supply. Where fixed exchange rate is determined by the government at a particular level. In floating exchange rate increasing value of currency is known as appreciation and a decreasing value is known as devaluation where in fix exchange rate decreased value is known as devaluation. Managed floating exchange rate is combination of flexible and fixed exchange rate where at certain movement central intervene through market operation to manage currency exchange rate.

The place where currencies are traded is known as .........

Foreign Exchange Market.

Commercial Bank.

Investment Bank.

Money Market.

Correct Answer

Option 1

Correct Answer

Explanation →

Q97:

13 May Shift 1

Macro > Balance of Payments

Medium

In deficit condition of Balance of Payment if the central bank sells foreign exchange then this particular transaction is known as .......

Official reserve sale.

Portfolio Investment.

Net Invisibles.

Net factor income.

Correct Answer

Option 1

Correct Answer

Explanation →

Q98:

13 May Shift 1

Macro > Balance of Payments

Easy

When an individual buys foreign goods, this spending is known as .....

Injection in the economy.

Exchange rate market.

Leakages from economy.

Direct investment.

Correct Answer

Option 3

Correct Answer

Explanation →

Q99:

13 May Shift 1

Macro > Balance of Payments

Medium

Suppose an Indian manufacturer of steel acquires a steel manufacturing unit in Europe. This type of transactions are recorded in which of the following.

Current Account.

Capital Account

Capital Market

Net Invisibles.

Correct Answer

Option 2

Correct Answer

Explanation →

Q100:

13 May Shift 1

Macro > Balance of Payments

Easy

The difference between the value of exports and the value of imports of goods of a country in a given period of time is known as by what name?

Balance of Trade

Balance of Payment

Capital Account Deficit

Net Invisibles.

Correct Answer

Option 1

Correct Answer

Explanation →

Q101:

CUET Economics 2024 Slot 1

Macro > Balance of Payments

Easy

Under flexible exchange rate, when the price of domestic currency in terms of foreign currency increases, it is called :

Depreciation of domestic currency

Appreciation of domestic currency

Devaluation of domestic currency

Revaluation of domestic currency

Correct Answer

Option 2

Correct Answer

Explanation →

Q102:

CUET Economics 2024 Slot 1

Macro > Balance of Payments

Medium

<table class="question-table"> <thead> <tr> <th colspan="2">Match List-I with List-II:</th> </tr> </thead> <tbody> <tr> <th>List-I</th> <th>List-II</th> </tr> <tr> <td>(A) Pegged exchange rate system</td> <td>(I) Setting up of IMF and World Bank</td> </tr> <tr> <td>(B) Managed floating</td> <td>(II) Fixed exchange rate system</td> </tr> <tr> <td>(C) Bretton Woods Conference</td> <td>(III) Dirty floating</td> </tr> <tr> <td>(D) Third element in BOP</td> <td>(IV) Error and Omission Account</td> </tr> </tbody> </table>

Match List-I with List-II :

(A) - (II), (B) - (I), (C) - (III), (D) - (IV)

(A) - (II), (B) - (III), (C) - (I), (D) - (IV)

(A) - (I), (B) - (II), (C) - (IV), (D) - (III)

(A) - (III), (B) - (IV), (C) - (II), (D) - (I)

Correct Answer

Option 2

Correct Answer

Explanation →

Q103:

CUET Economics 2024 Slot 1

Macro > Balance of Payments

Hard

(A) Smithsonian Agreement (B) Bretton Woods Conference (C) Establishment of WTO (D) Gold Standard

Arrange the following elements in correct chronological sequence (earliest to latest) :

(A), (B), (C), (D)

(D), (B), (A), (C)

(D), (A), (B), (C)

(C), (B), (D), (A)

Correct Answer

Option 2

Correct Answer

Explanation →

Q104:

CUET Economics 2023 Slot 6

Macro > Balance of Payments

Medium

Match List I with List II | LIST I | LIST II | | --- | --- | | A. Accommodating items | I. International purchases | | B. Capital Account | II. Central Bank | | C. Balance of trade | III. Below the line items | | D. Dirty Floating | IV. Visible items | Choose the correct answer from the options given below:

A-III, B-I, C-IV, D-II

A-I, B-II, C-III, D-IV

A-III, B-IV, C-II, D-I

A-IV, B-II, C-I, D-III

Correct Answer

Option 1

Correct Answer

Explanation →

Q105:

CUET Economics 2023 Slot 6

Macro > Balance of Payments

Easy

Flexible exchange rate is determined by:

RBI

Govt

Market forces

IMF

Correct Answer

Option 3

Correct Answer

Explanation →

Q106:

CUET Economics 2023 Slot 6

Macro > Balance of Payments

Easy

Full form of IBRD

Indian Bank for Reconstruction

Indian Bank for Rural Development

International Bank for Rural Development

International Bank for Reconstruction and Development

Correct Answer

Option 4

Correct Answer

Explanation →

Q107:

CUET Economics 2023 Slot 6

Macro > Balance of Payments

Easy

Exchange Rate is the price of a currency expressed in terms of.

Gold rates of other country

Another currency

Income of the country

FDI from other country

Correct Answer

Option 2

Correct Answer

Explanation →

Q108:

CUET Economics 2023 Slot 6

Macro > Balance of Payments

Easy

The International Bank for Reconstruction and Development (IBRD) is popularly known as_______.

State Bank of India

Reserve Bank Of India

World Bank

International Monetary Fund

Correct Answer

Option 3

Correct Answer

Explanation →

Q109:

CUET Economics 2023 Slot 5

Macro > Balance of Payments

Medium

Profits obtained by a foreign firm's branch in India will be recorded on which side and in which account of balance of payment.

Credit side of current account

Debit side of current account

Credit side of capital account

Debit side of capital account

Correct Answer

Option 2

Correct Answer

Explanation →

Q110:

CUET Economics 2023 Slot 5

Macro > Balance of Payments

Easy

The shape of supply curve of foreign exchange is :

A horizontal line parallel to x-axis

A vertical line parallel to y-axis

An upward sloping line

A downward sloping line

Correct Answer

Option 3

Correct Answer

Explanation →

Q111:

CUET Economics 2023 Slot 5

Macro > Balance of Payments

Easy

When autonomous receipts are less than autonomous payments. The balance of payments is in :

Surplus

Deficit

Balanced

Equilibrium

Correct Answer

Option 2

Correct Answer

Explanation →

Q112:

CUET Economics 2023 Slot 5

Macro > Balance of Payments

Easy

A __________ account deficit is financed by net capital flows from the rest of the world, thus by a capital account surplus.

Capital

Current

Saving

Recurring

Correct Answer

Option 2

Correct Answer

Explanation →

Q113:

CUET Economics 2023 Slot 4

Macro > Balance of Payments

Medium

Which of the following statements are true ? (A) Managed floating is also called dirty floating. (B) Making domestic currency cheaper by government is called devaluation (C) Exchange rate determined by the market forces of demand and supply, known as floating exchange rate. (D) In a fixed exchange rate system, the government fixes the exchange rate. Choose the correct answer from the options given below :

(A), (B), (C) and (D) Only

(A), (B) and (C) Only

(A), (B) and (D) Only

(A), (C) and (D) Only

Correct Answer

Option 1

Correct Answer

Explanation →

Q114:

CUET Economics 2023 Slot 4

Macro > Balance of Payments

Easy

Decrease in value of domestic currency to foreign currency in fixed exchange rate system is called :

Depreciation

Devaluation

Appreciation

Revaluation

Correct Answer

Option 2

Correct Answer

Explanation →

Q115:

CUET Economics 2023 Slot 4

Macro > Balance of Payments

Medium

Capital Account of balance of payment includes : (A) Export and Import of goods (B) Receipt of loans from abroad (C) Purchase of shares in foreign countries (D) Current transfers from Abroad (E) Repayment of International loans Choose the correct answer from the options given below :

(A), (D), (C) Only

(D), (B), (A) Only

(B), (C), (E) Only

(B), (A), (D) Only

Correct Answer

Option 3

Correct Answer

Explanation →

Q116:

CUET Economics 2023 Slot 4

Macro > Balance of Payments

Medium

Interest paid on loan taken from IMF will be recorded in ________ side of ________ account.

Credit, Current

Debit, Current

Credit, Capital

Debit, Capital

Correct Answer

Option 2

Correct Answer

Explanation →

Q117:

CUET Economics 2023 Slot 4

Macro > Balance of Payments

Medium

The transactions which are determined by the gap in the balance of payments, whether a deficit or surplus is called :

Dirty floating transactions

Accommodating transactions

Availability transactions

Managed floating transactions

Correct Answer

Option 2

Correct Answer

Explanation →

Q118:

CUET Economics 2023 Slot 3

Macro > Balance of Payments

Easy

More foreign currency will flow into the home country when :

When people of home country want to send gifts abroad

When people of home country want to purchase financial assets abroad

Imports increase

Exports increase

Correct Answer

Option 4

Correct Answer

Explanation →

Q119:

CUET Economics 2023 Slot 3

Macro > Balance of Payments

Medium

Which of the following are the components of current Account ? (A) Trade in Services (B) Trade in Goods (C) Investment (D) External borrowings (E) External Assistance Choose the correct answer from the options given below :

(C) & (D) Only

(D) & (E) Only

(E) & (C) Only

(A) & (B) Only

Correct Answer

Option 4

Correct Answer

Explanation →

Q120:

CUET Economics 2023 Slot 3

Macro > Balance of Payments

Hard

Arrange the following statements in correct sequence relating to change in exchange. (A) The Central Bank intervenes to purchase dollars rate between Dollars and Rupee in the foreign exchange market. (B) The government sets the exchange rate above the equilibrium exchange rate. (C) This will absorb the excess supply of dollars in the foreign exchange market. (D) It will result in excess supply of dollars in the foreign exchange market. Choose the correct answer from the options given below :

(B), (D), (A), (C)

(D), (C), (B), (A)

(C), (D), (A), (B)

(A), (B), (C), (D)

Correct Answer

Option 1

Correct Answer

Explanation →

Q121:

CUET Economics 2023 Slot 3

Macro > Balance of Payments

Medium

What are the major components of capital Account among the following ? (A) Bank Deposits (B) Investment (C) External Borrowings (D) External Assistance Choose the correct answer from the options given below :

(A), (B), (C) & (D) Only

(B), (C) & (D) Only

(A), (C) & (D) Only

(A), (B) & (C) Only

Correct Answer

Option 1

Correct Answer

Explanation →

Q122:

CUET Economics 2023 Slot 2

Macro > Balance of Payments

Medium

Which of the following statement is true about Autonomous transactions?

These items are done to correct the imbalance of BOP Account

These are also known as below the line item

These only occur in capital A/c of BOP

BOP is said to be in surplus if autonomous receipts are greater than autonomous payments

Correct Answer

Option 4

Correct Answer

Explanation →

Q123:

CUET Economics 2023 Slot 2

Macro > Balance of Payments

Easy

People demand foreign exchange because:

They want to send gifts abroad

The foreigners send gift in our country

They want to purchase imported goods from our market

The foreigners like to purchase goods from our market

Correct Answer

Option 1

Correct Answer

Explanation →

Q124:

CUET Economics 2023 Slot 2

Macro > Balance of Payments

Medium

When nation is a borrower from other countries means:

Trade surplus

Deficit in current Account

Surplus in current Account

Trade Deficit

Correct Answer

Option 2

Correct Answer

Explanation →

Q125:

CUET Economics 2023 Slot 2

Macro > Balance of Payments

Medium

Which of the following statements is true. If exchange rate changes from $1 = Rs 72 to Rs 81. A. Import will fall B. Import will rise C. Exports will rise D. National Income will rise E. National Income will fall Choose the correct answer from the options given below:

B, C and D only

A, C and D only

B, C and E only

A, C and E only

Correct Answer

Option 2

Correct Answer

Explanation →

Q126:

CUET Economics 2023 Slot 1

Macro > Balance of Payments

Medium

Current Account components of trade in services include : (A) Gifts, Remittances (B) Net Non-Factor Income (C) Net Investment Income (D) Grants Choose the correct answer from the options given below :

(A), (B) and (C) Only

(B) and (C) Only

(A) and (D) Only

(B), (C) and (D) Only

Correct Answer

Option 2

Correct Answer

Explanation →

Q127:

CUET Economics 2023 Slot 1

Macro > Balance of Payments

Medium

Match List - I with List - II. List - I | List - II (A) Flexible exchange rate | (I) Market forces (B) Devaluation | (II) Pegged exchange rate (C) Fixed exchange rate | (III) Floating exchange rate (D) Depreciation | (IV) Government Choose the correct answer from the options given below :

(A)-(II), (B)-(III), (C)-(I), (D)-(IV)

(A)-(I), (B)-(II), (C)-(IV), (D)-(III)

(A)-(III), (B)-(IV), (C)-(II), (D)-(I)

(A)-(IV), (B)-(I), (C)-(III), (D)-(II)

Correct Answer

Option 3

Correct Answer

Explanation →

Q128:

CUET Economics 2023 Slot 1

Macro > Balance of Payments

Easy

If Trade Deficit is Rs 2000 crores and imports is worth Rs 4000 crore, then the value of exports will be :

Zero

Rs 4000 crore

Rs 2000 crore

Rs 6000 crore

Correct Answer

Option 3

Correct Answer

Explanation →

Q129:

CUET Economics 2023 Slot 1

Macro > Balance of Payments

Medium

Match List - I with List - II. List - I | List - II (A) Trade includes export and import of goods | (I) Capital Account (B) Foreign Direct Investment | (II) Invisible Trade (C) Net sale of service products like banking and tourism | (III) Transfer Payment (D) The Receipts of payment without providing goods and services | (IV) Current Account Choose the correct answer from the options given below :

(A)-(III), (B)-(II), (C)-(I), (D)-(IV)

(A)-(III), (B)-(IV), (C)-(I), (D)-(II)

(A)-(IV), (B)-(I), (C)-(II), (D)-(III)

(A)-(I), (B)-(II), (C)-(III), (D)-(IV)

Correct Answer

Option 3

Correct Answer

Explanation →

Q130:

CUET Economics 2023 Slot 1

Macro > Balance of Payments

Medium

Which of the following items can be included in Capital Account in BOP ? (A) An Indian buys a UK Car company (B) A Swedish citizen buys shares of Reliance company (C) Export of Rajasthan's blue pottery to an Italian restaurant owner (D) Apple I-phones gifted by an Indian company to its employees Choose the correct answer from the options given below :

(B) and (C) Only

(C) and (D) Only

(A) and (D) Only

(A) and (B) Only

Correct Answer

Option 4

Correct Answer

Explanation →

Q131:

CUET Economics 2022 Slot 5

Macro > Balance of Payments

Medium

Match List - I with List - II. | List - I (Concept) | List - II (Meaning) | |---|---| | (A) Trade surplus | (I) Excess of the payments for import of goods over the receipts for export of goods | | (B) Devaluation of currency | (II) Excess of exports of goods over the imports of goods | | (C) Trade deficit | (III) Fall in the external value of a domestic currency as notified by the government of the country | | (D) Balance of trade | (IV) Difference between the value of exports and value of imports of goods of a country | Choose the correct answer from the options given below :

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (II), (B) - (III), (C) - (I), (D) - (IV)

(A) - (IV), (B) - (III), (C) - (II), (D) - (I)

(A) - (III), (B) - (II), (C) - (I), (D) - (IV)

Correct Answer

Option 2

Correct Answer

Explanation →

Q132:

CUET Economics 2022 Slot 5

Macro > Balance of Payments

Medium

Arrange the following statements relating to appreciation of domestic currency in the correct sequence. (A) The demand curve for foreign exchange shifts to the right of the original demand curve (B) Due to some reason the exchange rate falls to 1$ = Rs. 70 (C) The initial exchange rate is 1$ = Rs. 75 (D) This increase the demand for foreign goods and services by Indians Choose the correct answer from the options given below :

(A), (D), (C), (B)

(C), (B), (D), (A)

(C), (A), (D), (B)

(A), (C), (B), (D)

Correct Answer

Option 2

Correct Answer

Explanation →

Q133:

CUET Economics 2022 Slot 4

Macro > Balance of Payments

Easy

Raising the value of country's currency under fixed exchange rate system is :

Devaluation

Appreciation

Revaluation

Depreciation

Correct Answer

Option 3

Correct Answer

Explanation →

Q134:

CUET Economics 2022 Slot 4

Macro > Balance of Payments

Medium

Owing to the current political instability across many countries, the Indian rupee has sharply lost its value in terms of US dollars. The impact of this would be : (A) A rise in imports from USA (B) A fall in imports from USA (C) A rise in exports to USA (D) A fall in exports to USA Choose the correct answer from the options given below :

(A) and (B) only

(B) and (D) only

(C) and (D) only

(B) and (C) only

Correct Answer

Option 4

Correct Answer

Explanation →

Q135:

CUET Economics 2022 Slot 3

Macro > Balance of Payments

Easy

Devaluation of domestic currency will make :

Imports and Exports both become expensive

Imports become expensive and Exports become cheaper

Imports become cheaper and Exports become expensive

Imports and Exports both become cheaper

Correct Answer

Option 2

Correct Answer

Explanation →

Q136:

CUET Economics 2022 Slot 3

Macro > Balance of Payments

Medium

Indian Real Estate Company receives rent from Microsoft from London. This transaction will be recorded in __________ Account.

Credit side of current

Debit side of current

Credit side of capital

Debit side of capital

Correct Answer

Option 1

Correct Answer

Explanation →

Q137:

CUET Economics 2022 Slot 3

Macro > Balance of Payments

Easy

The causes of the Asian Financial Crisis are complicated and disputable. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian Countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their **Gross Domestic Product (GDP).** The achievement was known as the "Asian Economic Miracle. However, a significant risk was embedded in the achievement. The economic development in the Countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high-interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favorable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy. In the mid-1990s, following the recovery of the US. from a recession, the **Federal Reserve** raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market. leading to an appreciation of the U.S. dollar. The currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth. with a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw. This translated into increased demand for US dollars. Further, there was no perceptible increase in the supply of dollars as wary investors shied away from investing in these economies. With demand being greater than supply, the US dollar appreciated with the domestic currency depreciating. The depreciation of the local currencies fuelled more investments being pulled out of these economies thus resulting in a crisis. Thus Thai Government first ran out of foreign currency to support its exchange rate, forcing it to float the baht. The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian Countries soon after.

The likely impact of a depreciation of the domestic currencies of the South East Asian Countries on exports to the US would be :

The exports will rise

The exports will fall

The exports will remain unchanged

The imports will rise

Correct Answer

Option 1

Correct Answer

Explanation →

Q138:

CUET Economics 2022 Slot 3

Macro > Balance of Payments

Medium

The causes of the Asian Financial Crisis are complicated and disputable. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian Countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their **Gross Domestic Product (GDP).** The achievement was known as the "Asian Economic Miracle. However, a significant risk was embedded in the achievement. The economic development in the Countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high-interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favorable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy. In the mid-1990s, following the recovery of the US. from a recession, the **Federal Reserve** raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market. leading to an appreciation of the U.S. dollar. The currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth. with a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw. This translated into increased demand for US dollars. Further, there was no perceptible increase in the supply of dollars as wary investors shied away from investing in these economies. With demand being greater than supply, the US dollar appreciated with the domestic currency depreciating. The depreciation of the local currencies fuelled more investments being pulled out of these economies thus resulting in a crisis. Thus Thai Government first ran out of foreign currency to support its exchange rate, forcing it to float the baht. The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian Countries soon after.

Identify the most unlikely reason or appreciation of the US dollar.

The Federal Reserve raising the interest rate against inflation.

The rising demand for the US dollar with the investors withdrawing their investments.

High rates of economic growth experienced by the South East Asian Countries during late 1980's and early 1990's.

Fall in prices of assets of the Southeast Asian Countries.

Correct Answer

Option 3

Correct Answer

Explanation →

Q139:

CUET Economics 2022 Slot 3

Macro > Balance of Payments

Medium

The causes of the Asian Financial Crisis are complicated and disputable. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian Countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their **Gross Domestic Product (GDP).** The achievement was known as the "Asian Economic Miracle. However, a significant risk was embedded in the achievement. The economic development in the Countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high-interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favorable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy. In the mid-1990s, following the recovery of the US. from a recession, the **Federal Reserve** raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market. leading to an appreciation of the U.S. dollar. The currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth. with a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw. This translated into increased demand for US dollars. Further, there was no perceptible increase in the supply of dollars as wary investors shied away from investing in these economies. With demand being greater than supply, the US dollar appreciated with the domestic currency depreciating. The depreciation of the local currencies fuelled more investments being pulled out of these economies thus resulting in a crisis. Thus Thai Government first ran out of foreign currency to support its exchange rate, forcing it to float the baht. The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian Countries soon after.

The likely impact of an appreciation of the US dollar, on imports of the South East Asian Countries from the US. would be :

The imports will rise

The imports will fall

The imports will remain unchanged

The imports may rise or fall

Correct Answer

Option 2

Correct Answer

Explanation →

Q140:

CUET Economics 2022 Slot 3

Macro > Balance of Payments

Easy

The causes of the Asian Financial Crisis are complicated and disputable. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian Countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their **Gross Domestic Product (GDP).** The achievement was known as the "Asian Economic Miracle. However, a significant risk was embedded in the achievement. The economic development in the Countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high-interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favorable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy. In the mid-1990s, following the recovery of the US. from a recession, the **Federal Reserve** raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market. leading to an appreciation of the U.S. dollar. The currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth. with a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw. This translated into increased demand for US dollars. Further, there was no perceptible increase in the supply of dollars as wary investors shied away from investing in these economies. With demand being greater than supply, the US dollar appreciated with the domestic currency depreciating. The depreciation of the local currencies fuelled more investments being pulled out of these economies thus resulting in a crisis. Thus Thai Government first ran out of foreign currency to support its exchange rate, forcing it to float the baht. The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian Countries soon after.

The likely impact on the Balance of payment position of Countries facing a financial crisis would be :

There is a deficit on the Balance of Payment account

There is surplus on the Balance of Payment account

There is no impact on the Balance of Payment account

There is a balance on the Balance of Payment account

Correct Answer

Option 1

Correct Answer

Explanation →

Q141:

CUET Economics 2022 Slot 3

Macro > Balance of Payments

Hard

The causes of the Asian Financial Crisis are complicated and disputable. A major cause is considered to be the collapse of the hot money bubble. During the late 1980s and early 1990s, many Southeast Asian Countries, including Thailand, Singapore, Malaysia, Indonesia, and South Korea, achieved massive economic growth of an 8% to 12% increase in their **Gross Domestic Product (GDP).** The achievement was known as the "Asian Economic Miracle. However, a significant risk was embedded in the achievement. The economic development in the Countries mentioned above were mainly boosted by export growth and foreign investment. Therefore, high-interest rates and fixed currency exchange rates (pegged to the U.S. dollar) were implemented to attract hot money. Also, the exchange rate was pegged at a rate favorable to exporters. However, both the capital market and corporates were left exposed to foreign exchange risk due to the fixed currency exchange rate policy. In the mid-1990s, following the recovery of the US. from a recession, the **Federal Reserve** raised the interest rate against inflation. The higher interest rate attracted hot money to flow into the U.S. market. leading to an appreciation of the U.S. dollar. The currencies pegged to the U.S. dollar also appreciated, and thus hurt export growth. with a shock in both export and foreign investment, asset prices, which were leveraged by large amounts of credits, began to collapse. The panicked foreign investors began to withdraw. This translated into increased demand for US dollars. Further, there was no perceptible increase in the supply of dollars as wary investors shied away from investing in these economies. With demand being greater than supply, the US dollar appreciated with the domestic currency depreciating. The depreciation of the local currencies fuelled more investments being pulled out of these economies thus resulting in a crisis. Thus Thai Government first ran out of foreign currency to support its exchange rate, forcing it to float the baht. The value of the baht thus collapsed immediately afterward. The same also happened to the rest of the Asian Countries soon after.

The likely reason for investors from Western Countries pulling out their investments from these nations was :

The returns on their investments were falling as their domestic currency was depreciating.

The returns on their investments were falling as their domestic currency was appreciating.

The returns on their investments was expected to rise in the near future.

They wanted to take their investments back to their own respective nations.

Correct Answer

Option 2

Correct Answer

Explanation →

Q142:

CUET Economics 2022 Slot 1

Macro > Balance of Payments

Easy

Match List I with List II | List I - Foreign Exchange Rate | List II - Derived Meaning | | --- | --- | | A. Fixed exchange rate | I. Mixture of fixed and flexible exchange rate system. | | B. Floating exchange rate | II. Determined by government. | | C. Managed floating | III. Expectation of gain from appreciation of the currency | | D. Speculation | IV. Determined by market forces of demand and supply of forex | Choose the correct answer from the options given below:

A-IV, B-II, C-I, D-III

A-II, B-IV, C-I, D-III

A-I, B-IV, C-III, D-II

A-II, B-III, C-I, D-IV

Correct Answer

Option 2

Correct Answer

Explanation →

Q143:

CUET Economics 2022 Slot 1

Macro > Balance of Payments

Medium

Which of the following is not a component of current account:

Imports of machines

Trade in services

Grants received from a foreign government for rebuilding flood hit areas

Purchase of stock of a foreign company in London.

Correct Answer

Option 4

Correct Answer

Explanation →

Q144:

CUET Economics 2022 Slot 1

Macro > Balance of Payments

Easy

A change in the exchange rate of the Indian rupee and the British Pound from Rs.95 for a pound to Rs.100 for a pound will mean:

Indian exports to Britain will increase.

Indian imports from Britain will increase.

Indian exports to Britain will decrease.

There will be no change in exports and imports between the two countries

Correct Answer

Option 1

Correct Answer

Explanation →