Balance of Payments

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1. A part of National Debt known as External Debt is the amount.
(A) Borrowed by its citizen from abroad
(B) Lent by its citizens to foreign governments
(C) Borrowed by its government from abroad
(D) Lent by its government to foreign government
Ans. (C)
2. The process of organizing business-pact between group of countries is called as –
(A) Trading Block
(B) Trade venture
(C) Trade Partner
(D) Trade organizer
Ans. (A)

3. The practice of selling goods in a foreigncountry at a price below their domestic selling price is called-
(A) Diplomacy
(B) Discriminator
(C) Dumping
(D) Double pricing
Ans. (C)

4. “Full convertibility of a rupee” means–
(A) Purchase of foreign exchange for rupees only
(B) Payment for imports in terms of rupees
(C) Repayment of loans in terms of rupees
(D) Determination of rate of exchange between rupee and foreign currencies freely by the market forces of demandand supply.
Ans. (D)

5. The Full form of SDR is–
(A) Special Dollar Rights
(B) Special Drawing Rights
(C) State Drawing Rights
(D) Specific Dollar Right
Ans. (B)

6. Buying of shares and bonds of Indian companies by foreign institutions is called-
(A) Foreign Direct Investment
(B) Portfolio Investment
(C) Institutional Investment
(D) Foreign Indirect Investment
Ans. (B)

7. Private investment is otherwise called as–
(A) Autonomous investment
(B) Foreign institutional investment
(C) Foreign direct investment
(D) Induced investment
Ans. (D)

8. The annual record for all the monetary transactions of a country with other countries of the world is known as–
(A) Balance of Trade
(B) Balance of Monetary Receipts
(C) Balance of Payments
(D) Balance Sheet
Ans. (C)

9. India’s Balance of Payments can be corrected through–
(A) Devaluation of currency
(B) Vigorous export promotion
(C) Import substitution
(D) All of the above
Ans. (D)

10. Which one of the following items is not included in the current account of India’s Balance of Payments?
(A) Short-Term Commercial Borrowings
(B) Non-Monetary Gold Movements
(C) Investment Income
(D) Transfer Payments
Ans. (B)

11. When there is an official change in the exchange rate of domestic currency, then it is called–
(A) Appreciation
(B) Depreciation
(C) Revaluation
(D) Deflation
Ans. (C)

12. At present, India is following-
(A) Fixed exchange Rate
(B) Floating exchange Rate
(C) Pegged up exchange Rate
(D) Pegged down exchange Rate
Ans. (B)

13. The outcome of ‘devaluation of currency’ is–
(A) Increased export and improvement in balance of payment
(B) Increased export and foreign reserve deficiency
(C) Increased import and improvement in balance of payment
(D) Increased export and import
Ans. (A)

14. The Government resorts to devaluation of its currency in order to promote–
(A) National Income
(B) International Goodwill
(C) Exports
(D) Savings
Ans. (C)

15. Devaluation makes import–
(A) Competitive
(B) Inelastic
(C) Cheaper
(D) Dearer
Ans. (D)

16. When did the rupee become a freely convertible currency on Current Account in India?
(A) 2000
(B) 2001
(C) 1994
(D) 1999
Ans. (C)

17. Devaluation usually causes the internal prices to–
(A) Fall
(B) Rise
(C) Remain unchanged
D) None of the above
Ans. (C)

18. Floating Exchange Rate is also referred to as–
(A) Flexible Exchange Rate
(B) Fixed Exchange Rate
(C) Real Exchange Rate
(D) Controlled Exchange Rate
Ans. (A)

19. Which one of the following does not deal with export promotion?
(A) Trade Development Authority
(B) Minerals and Metals Trading Corporation
(C) Cooperative Marketing Societies
(D) State Trading Corporation of India
Ans. (C)

20. A trade policy consists of–
(A) Export-Import Policy
(B) Licencing Policy
(C) Foreign Exchange Policy
(D) Balance of Payment Policy
Ans. (A)

21. The biggest item of India’s imports is–
(A) Iron ore
(B) Mica
(C) Petroleum products
(D) Gems and Jewellery
Ans. (C)

22. The difference between visible exports and visible imports is defined as–
(A) Balance of Trade
(B) Balance of Payment
(C) Balanced Terms of Trade
(D) Gains from Trade
Ans. (A)

23. A country’s balance of trade is unfavourable when–
(A) Exports exceed imports
(B) Imports exceed exports
(C) Terms of trade become unfavourable
(D) None of the above
Ans. (B)

24. Theoretically trade between two countries takes place on account of–
(A) Difference in Costs
(B) Scarcity of Goods
(C) Comparative Differences in Costs
(D) Need for Exports
Ans. (C)

25. FERA in India has been replaced by–
Ans. (B)

26. One of the main factors that led to rapid expansion of Indian exports is–
(A) Imposition of import duties
(B) Liberalisation of the economy
(C) Recession in other countries
(D) Diversification of exports
Ans. (D)

27. Interest on public debt is part of–
(A) Transfer payments by the enterprises
(B) Transfer payments by the government
(C) National income
(D) Interest payments by households
Ans. (B)

28. What is the revised upper limit for foreign direct investment in telecom service companies?
(A) 49 per cent
(B) 51 per cent
(C) 66 per cent
(D) 74 per cent
Ans. (A)

29. Canalised list of items in foreign trade on India refers to-
(A) The items to be imported by the private agencies
(B) List of items to be subsidised
(C) List of items to be granted duty concession
(D) Items to be imported only by the State owned undertaking
Ans. (D)

30. Which of the following does not form a part of the foreign exchange reserves of India?
(A) Gold
(B) SDRs
(C) Foreign currency assets
(D) Foreign currency and securities held by the banks and corporate bodies
Ans. (D)

31. How the interest-level of a country is affected by FDI?
(A) Increases
(B) Decreases
(C) Remains unaffected
(D) There is increase or decrease
Ans. (B)

32. Disinvestements is-
(A) Offloading of shares of privates companies to government
(B) Offloading of government shares to private companies
(C) Increase in investment
(D) closing down of business concerns
Ans. (B)

33. Foreign currency which has a tendency of quick migration is called-
(A) Scare currency
(B) Soft currency
(C) Gold currency
D) Hot currency
Ans. (D)

34. Devaluation of currency leads to-
(A) Expansion of export trade
(B) Contraction of import trade
(C) Expansion of import substitution
(D) All of the above
Ans. (D)

(1) Increase in export
(2) Decrease in import
(3) Increase in import substitution.
35. Under flexible exchange rate system, the exchange rate is determined by-
(A) The Central Bank of the country
(B) The forces of demand and supply in the foreign exchange market
(C) The price of gold
(D) The purchasing power of currencies
Ans. (B)

36. A currency having a falling exchange rate due to continuing balance of payments deficit is called a-
(A) Soft currency
(B) Hard currency
(C) Scarce currency
D) Surplus currency
Ans. (A)

37. Funds which flow into a country to take advantage of favourable rates of interest in that country is called-
(A) Cold Money
(B) Black Money
(C) Hot Money
(D) White Money
Ans. (C)

38. The purpose of devaluation is to:
(A) Be little foreign currencies
(B) Encourage export
(C) Discourage export
(D) Encourage import
Ans. (B)

39. Pegging up of a currency means, fixing the value of a currency-
(A) At a constant level
(B) at a lower level
(C) At a higher level
(D) Leaving at market forces
Ans. (C)

40. A favourable Balance of Trade of a country implies that-
(A) Imports are greater than Exports
(B) Exports are greater than Imports
(C) Both Imports and Exports are equal
(D) Rising Imports and Falling Exports
Ans. (B)

41. Contries that depend mainly on the export ofprimary products for their income, are prone to-
(A) Inflation
(B) Economic instability
(C) Increasing unemployment
(D) Stable economic growth
Ans. (C)

42. The balance of payments of a country is in equalibrium when the-
(A) Demand as well as supply of the domestic currency are the highest
(B) Demand for the domestic currency is equal to its supply
(C) Demand for the domestic currency is the highest
(D) Demand for the domestic currency is the lowest
Ans. (B)

43. In the balance of payments account, unrequited receipts and payments are also regarded as-
(A) Bilateral transfers
(B) Unilateral transfers
(C) Capital accounts transfers
(D) Invisible transfers
Ans. (B)

44. As a result of higher rate of inflation in India, the U.S. dollar will-
(A) Depreciate
(B) Constant
(C) Negligible
(D) Appreciate
Ans. (D)

45. Which type of foreign investment is considered as unsafe?
(A) Foreign Direct Investment (FDI)
(B) Portfolio Investment
(C) NRI deposits
(D) External commercial borrowing
Ans. (B)

46. At present, India is following-
(A) Fixed exchange rate
(B) Floating exchange rate
(C) Pegged up exchange rate
(D) Pegged down exchange rate
Ans. (B)

47. Excise duty is levied on-
(A) Sale of goods
(B) Production of goods
(C) Import of goods
(D) Export of goods
Ans. (D)

48. Lowering of value of currency relative to a foreign reference currency is called _________.
(A) Devaluation
(B) Revaluation
(C) Down valuation
(D) Negative valuation
Ans. (A)

49. Balance of Trade is the difference between-
(A) Country’s Income and Exemse
(B) Country’s Exports and Improts
(C) Country’s tax Revenus and Expense
(D) Country’s capital inflow and outflow
Ans. (B)

50. Which among the following is not an account under Balance of Payment?
(A) Current Account
(B) Capital Account
(C) Official Reserves Account
(D) Unilateral Payments Account
Ans. (C)

51. The __________ exchange rate is the relative price of foreign goods in terms of domestic goods.
(A) Artificial
(B) Nominal
(C) Fixed
(D) Real
Ans. (D)

52. The __________ exchange rate is the price of one unit of foreign currency in terms of domestic currency.
(A) Artificial
(B) Nominal
(C) Fixed
(D) Real
Ans. (B)

53. What is the full form of FDI?
(A) Foreign Direct Input
(B) Foreign Direct Investment
(C) Fiscal Direct Investment
(D) Fiscal Direct Input

54. Foreign investment is known by which name in India?
(A) SME (Small and medium-sized enterprises)
(B) MDI (Management Development Institute)
(C) FDI (Foreign Direct Investment)
(D) CII (Confederation of Indian Industry)
Ans. (C)

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