CUET Economics - Macro - Balance Of Payments | Free Questions - Page 2

Q1:

2026: 15 May Shift 1

Macro

>

Balance of Payments

Medium

Match the LIST-I with LIST-II

LIST-I	LIST-II
A. Third element of BOP	I. Dirty floating
B. Managed Floating	II. Depreciation of domestic currency
C. When the government makes domestic currency cheaper	III. Errors and omissions
D. When the price of foreign currency in terms of domestic currency has increased	IV. Devaluation

Choose the correct answer from the options given below:

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

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

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

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

Correct Answer

Option 4

Correct Answer

Explanation

Q2:

2026: 15 May Shift 1

Macro

>

Balance of Payments

Easy

There is a new classification in which the Balance of Payment have been divided into three accounts - the Current Account, the Capital Account and?

The Financial Account

Balance of Trade

BOP Deficit

BOP Surplus

Correct Answer

Option 1

Correct Answer

Explanation

Q3:

2026: 13 May Shift 2

Macro

>

Balance of Payments

Medium

Arrange the following statements in correct order in the context of flexible exchange rate system.

(A) When income increases, consumer spending increases.

(B) Shift in demand curve for foreign exchange towards right.

(C) Spending on imported goods increases.

(D) Depreciation of domestic currency with respect to foreign currency.

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 2

Correct Answer

Explanation

Q4:

2026: 13 May Shift 2

Macro

>

Balance of Payments

Easy

The country could use its reserves of foreign exchange in order to balance any deficit in its balance of payments. The reserve bank sells foreign exchange when there is a deficit is called ?

Autonomous Transactions.

Accommodating objective.

Official Reserve Sale.

Overall Balance of Payments.

Correct Answer

Option 3

Correct Answer

Explanation

Q5:

2026: 13 May Shift 2

Macro

>

Balance of Payments

Easy

Suppose the Indian government wants to encourage exports and fix a higher exchange rate, say Rs 100 per dollar from the current exchange rate of Rs 80 per dollar. This government action in the exchange rate system is called as?

Depreciation.

Devaluation.

Revaluation.

Appreciation.

Correct Answer

Option 2

Correct Answer

Explanation

Q6:

2026: 13 May Shift 1

Macro

>

Balance of Payments

Easy

In which one of the following exchange rate systems, 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?

Fixed Exchange Rate

Managed Floating Exchange Rate

Flexible Exchange Rate

Devaluation

Correct Answer

Option 2

Correct Answer

Explanation

Q7:

2026: 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 called?

Balance of Invisibles

Balance of Payments

Capital Account

Balance of Trade

Correct Answer

Option 4

Correct Answer

Explanation

Q8:

2026: 13 May Shift 1

Macro

>

Balance of Payments

Medium

Arrange the following steps in correct order with respect to change in exchange rate:

(A) Demand for foreign goods and services increases.

(B) It leads to a shift in the demand curve upward.

(C) That resulted in an increase in prices.

(D) The value of currency will fall in respect of foreign currency.

Choose the correct answer from the options given below:

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

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

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

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

Correct Answer

Option 1

Correct Answer

Explanation

Q9:

2026: 13 May Shift 1

Macro

>

Balance of Payments

Easy

A theory of international exchange which holds that, the price of similar goods in different countries is the same, this theory is known as the:

Purchasing power parity

Real exchange rate

Interest arbitrage theory

Fixed exchange rate

Correct Answer

Option 1

Correct Answer

Explanation

Q10:

2026: 12 May Shift 1

Macro

>

Balance of Payments

Medium

Arrange the following statements in correct sequence as a result of change in demand for import and its impact on exchange rate;

(A) An increase in exchange rate makes domestic goods cheaper, and increases the exports of domestic country.

(B) There is an increase in the income in the domestic country.

(C) It will lead to increase in the import demand.

(D) There will be increase in the exchange rate.

Choose the correct answer from the options given below:

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

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

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

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

Correct Answer

Option 2

Correct Answer

Explanation

Q11:

2026: 12 May Shift 1

Macro

>

Balance of Payments

Easy

Match List-I with List-II

List-I	List-II
(A) Autonomous transactions	(I) Current Account
(B) Net Exports	(II) 'Below the line' items in BoP
(C) Accommodating transactions	(III) Capital Account
(D) Portfolio Investment	(IV) 'Above the line' items in BoP

Choose the correct answer from the options given below:

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

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

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

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

Correct Answer

Option 4

Correct Answer

Explanation

Q12:

2026: 12 May Shift 1

Macro

>

Balance of Payments

Easy

Official reserve transactions are made to bridge the gap in the Balance of Payment (BoP), they are seen as the ________ item in the BoP.

Autonomous

Accommodating

Investment

Errors and Omission.

Correct Answer

Option 2

Correct Answer

Explanation

Q13:

2026: 12 May Shift 1

Macro

>

Balance of Payments

Easy

In order to promote exports in a fixed exchange rate system, the government can opt for-

Devaluation of domestic currency

Appreciation of domestic currency

Depreciation of domestic currency

Revaluation of domestic currency

Correct Answer

Option 1

Correct Answer

Explanation

Q14:

2026: 12 May Shift 1

Macro

>

Balance of Payments

Easy

Which of the following is correct for managed floating exchange system?

A mixture of the gold standard and a flexible exchange rate system.

A mixture of fixed rate system and Bretton Woods System.

A mixture of dirty floating system and Bretton Woods System.

A mixture of a flexible exchange rate system and a fixed rate system.

Correct Answer

Option 4

Correct Answer

Explanation

Q15:

2026: 11 May Shift 2

Macro

>

Balance of Payments

Medium

Which of the following is true for the surplus in the Balance of Payments?

Overall Balance < 0

Reserve Change < 0

Reserve Change > 0

Reserve Change = 0

Correct Answer

Option 2

Correct Answer

Explanation

Q16:

2026: 11 May Shift 2

Macro

>

Balance of Payments

Easy

The Capital Account of Balance of Payments includes:

Imports and Exports of Visibles.

Imports and Exports of Invisibles.

Net Factor Income.

External Commercial Borrowing.

Correct Answer

Option 4

Correct Answer

Explanation

Q17:

2026: 11 May Shift 2

Macro

>

Balance of Payments

Easy

Arrange the following in the correct order with respect to the change in import demand and its impact on exchange rate:

A. National income increases.

B. Domestic currency depreciates.

C. Spending on imported goods is likely to increase.

D. The demand curve for foreign exchange shifts to the right.

Choose the correct answer from the options given below:

C, B, A, D

A, B, C, D

A, C, D, B

C, B, D, A

Correct Answer

Option 3

Correct Answer

Explanation

Q18:

2026: 11 May Shift 2

Macro

>

Balance of Payments

Easy

Match the LIST-I with LIST-II

LIST-I	LIST-II
A. Flexible Exchange Rate System	I. Central banks intervene to buy and sell foreign currencies
B. Fixed Exchange Rate System	II. Exchange rate determine by market forces
C. Managed Floating Exchange Rate System	III. It reflects differences in the price levels in the two countries
D. Purchasing Power (PPP) theory	IV. The exchange rate set by the Government

Choose the correct answer from the options given below:

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

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

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

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

Correct Answer

Option 3

Correct Answer

Explanation

Q19:

2026: 11 May Shift 1

Macro

>

Balance of Payments

Easy

Which of the following is not a component of current account in balance of payment?

Trade in services

Net factor income

Gifts ,remittances and grants

Offshore funds

Correct Answer

Option 4

Correct Answer

Explanation

Q20:

2026: 11 May Shift 1

Macro

>

Balance of Payments

Medium

Why official reserve transactions are not equal to zero under managed floating exchange rate system?

Central banks do intervene in the foreign exchange market.

Market forces determine the rate in the foreign exchange market.

Central banks do not intervene in the foreign exchange market.

Repo rate and reverse repo rate cancel each other.

Correct Answer

Option 1

Correct Answer

Explanation

Q21:

2026: 11 May Shift 1

Macro

>

Balance of Payments

Easy

Under which exchange rate appreciation and depreciation takes place and under which exchange rate devaluation and revaluation takes place respectively?

Under fixed exchange rate and flexible exchange rate respectively

Under flexible exchange rate and fixed exchange rate respectively

Under rigid exchange rate and reliable exchange rate respectively

Under foreign exchange rate and domestic exchange rate respectively

Correct Answer

Option 2

Correct Answer

Explanation

Q22:

2026: 11 May Shift 1

Macro

>

Balance of Payments

Easy

Calculate the current account balance from the following values (given in dollars):

Exports of goods =188

Import of goods =248

Net invisibles;

A. Non-factor services=56

B. Transfers=36

C. Income receipts =10

162

42

160

150

Correct Answer

Option 2

Correct Answer

Explanation

Q23:

2025: 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

Q24:

2025: 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

Q25:

2025: 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

Q26:

2025: 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

Q27:

2025: 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

Q28:

2025: 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

Q29:

2025: 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

Q30:

2025: 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

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