Tag: balance of payments

Quizzes (1) Questions (59)

Questions Related to balance of payments

Multiple choice business economics and quantitative methods balance of payments exchange rate balance of payments and exchange rate balance of trade and balance of payments

In what way devaluation helps a country?

  1. Improvement in Balance of Payment situation

  2. Encourages exports

  3. Discourages imports

  4. All the three
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A devaluation of the currency may help improve the balance of payments situation when it is in a deficit, as a devaluation makes it attractive to purchase domestic goods as it becomes relatively cheaper to do so thus the value of imports is likely to decrease and the value of exports is likely to increase. 

Multiple choice business economics and quantitative methods balance of payments exchange rate balance of payments and exchange rate balance of trade and balance of payments

Which of these measures is / are essential to make devaluation successful?

  1. Export performance of exporting units should be strengthened

  2. Export quality should be improved

  3. Domestic prices should be checked

  4. All the three
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

For devaluation to be successful, the country must be able to export more (improved performance and quality) and keep domestic inflation in check so that the price advantage is not lost.

Multiple choice business economics and quantitative methods balance of payments exchange rate balance of payments and exchange rate balance of trade and balance of payments

SDR stands for ______.

  1. Small Denomination Receipts

  2. Special Drawing Rights

  3. Silver Deposit Receipts

  4. Special Deposit Receipts
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

SDR stands for Special Drawing Rights, which is an international reserve asset created by the International Monetary Fund (IMF).

Multiple choice business economics and quantitative methods balance of payments exchange rate balance of payments and exchange rate balance of trade and balance of payments

Depreciation of currency means a  ________.

  1. fall in exchange value of a country by market forces

  2. reduction in external value/exchange value of currency by the Government

  3. reduction in external value / exchange value due to wear and tear

  4. all the three
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a country follows a floating exchange rate regime, it is possible for the currency to fall in value due to a fall in demand for the currency that can be caused for a variety of reasons like decline of demand for the country's exports or attractive investment opportunities abroad.

Multiple choice business economics and quantitative methods balance of payments exchange rate balance of payments and exchange rate balance of trade and balance of payments

Dual exchange rate was introduced in _______.

  1. 1992-93

  2. 1989-90

  3. 1999-2000

  4. 1993-94
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the RBI "The Liberalised Exchange Rate Management System (LERMS) was put in place in March 1992 involving the dual exchange rate system in the interim period. The dual exchange rate system was replaced by a unified exchange rate system in March 1993".

Multiple choice business economics and quantitative methods balance of payments exchange rate balance of payments and exchange rate balance of trade and balance of payments

India has achieved full convertibility of the Rupee in _________.

  1. current account

  2. capital account

  3. both (a) and (b)

  4. neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

India has achieved full convertibility of the Rupee on the current account, allowing for the free conversion of currency for trade in goods and services, but capital account convertibility remains restricted.

Multiple choice business economics and quantitative methods balance of payments exchange rate balance of payments and exchange rate balance of trade and balance of payments

In commodity exchanges in India, Index Futures are not permitted, as some of the provisions of the FCRA do not allow the same. What is the full form of FCRA?

  1. Foreign Commodities Regulation Act

  2. Forward Commodities Repurchasing Act

  3. Forward Contracts Regulation Act

  4. Financial Contracts Reformation Act
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The full form of FCRA is Forward Contracts Regulations Act . 


In 1952 , FCRA act was enacted to provide for the regulation of certain matters relating to forward contracts , the prohibition of options in goods and for matters connected therewith.

Forward contract is a contract between two parties to buy or sell an asset at a specified future time at a price agreed up on today. Index futures are contracts based on a financial index , which can be bought or sold for speculative or hedging reasons , or for future delivery.