Balance of Payments - Online Test
Q1. Managed floating exchange rate is a system in which the
Answer : Option D
Explaination / Solution:
Managed flow regeime is the current international finance environment in which exchange rates fluctuate from day to day, but central banks attempt to influence their countries' exchange rates by buying and selling currencies. It is also known as a dirty flow.
In an increasingly integrated world economy, the currency rates impact any given country's economy through the trade balance. In this aspect, almost all currencies are managed since central bank or government intervene to influence the value of their currencies.
Q2. A component of capital account of balance of payment is
Answer : Option D
Explaination / Solution:
All transactions relating to borrowings from abroad by private sector, government, etc. Receipts of such loans and repayment of loans by foreigners are recorded on the positive (credit) side.
All transactions of lending to abroad by private sector and government. Lending abroad and repayment of loans to abroad is recorded as negative or debit item.
Capital account of BOP records all those transactions, between the residents of a country and the rest of the world, which cause a change in the assets or liabilities of the residents of the country or its government. It is related to claims and liabilities of financial nature.
Q3. Which transactions determine the balance of trade?
Answer : Option A
Explaination / Solution:
The difference between the value of goods and services exported out of a country and the value of goods and services imported into the country. The balance of trade is the official term for net exports that makes up the balance of payments. The balance of trade can be a "favorable" surplus (exports exceed imports) or an "unfavorable" deficit (imports exceed exports). The official balance of trade is separated into the balance of merchandise trade for tangible goods and the balance of services.
Q4. Balance of trade is in surplus when
Answer : Option A
Explaination / Solution:
A trade surplus is an economic measure of a positive balance of trade, where a country's exports exceed its imports. A trade surplus represents a net inflow of domestic currency from foreign markets. trade surplus helps to strengthen a country’s currency; however, this is dependent on the proportion of goods and services of a country in comparison to other countries as well as other market factors. Countries can also highly control their currency through foreign investment efforts.
Q5. A deficit in BOP occurs
Answer : Option B
Explaination / Solution:
Balance of payments includes all external visible and non-visible transactions of a country. If a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign investments, by running down currency reserves or by receiving loans from other countries.
Q6. Devaluation is a
Answer : Option C
Explaination / Solution:
No Explaination.
Q7. Depreciation is a
Answer : Option D
Explaination / Solution:
No Explaination.
Q8. When price of a foreign currency rises its supply also rises.
Answer : Option C
Explaination / Solution:
No Explaination.
Q9. If exchange rate increases, this will make
Answer : Option A
Explaination / Solution:
No Explaination.
Q10. The demand for foreign exchange and the exchange rate has
Answer : Option C
Explaination / Solution:
No Explaination.
