Balance of Payments - Online Test
Q1. Foreign exchange rate of a country is the
Answer : Option D
Explaination / Solution:
Foreign exchange rate defines the price of currency of domestic country in terms of foreign currency
Q2. A source of supply of foreign exchange is
Answer : Option C
Explaination / Solution:
When price of a foreign currency rises, domestic goods become relatively cheaper. It induces the foreign country to increase their imports from the domestic country
Q3. Foreign exchange means
Answer : Option C
Explaination / Solution:
No Explaination.
Q4. Balance of payment Accounts is a
Answer : Option C
Explaination / Solution:
Balance of payment account is a systematic record of all economic transactions between residents of home country and residents of foreign countries during a given point of time.
Q5. A source of demand for foreign exchange is
Answer : Option A
Explaination / Solution:
No Explaination.
Q6. A deficit in balance of trade indicates
Answer : Option A
Explaination / Solution:
No Explaination.
Q7. Fixed exchange rate is
Answer : Option D
Explaination / Solution:
A fixed exchange rate is a country's exchange rate regime under which the government or Central bank ties the official exchange rate to another country's currency or to the price of gold. The purpose of a fixed exchange rate system is to maintain a country's currency value within a very narrow band.
Q8. Flexible exchange rate is
Answer : Option C
Explaination / Solution:
flexible exchange-rate system is a monetary system that allows the exchange rate to be determined by supply and demand.As it variates according to market forces.
Q9. Flexible exchange rate is determined by
Answer : Option A
Explaination / Solution:
It is determined by market forces because every currency area must decide what type of exchange rate arrangement to maintain. Between permanently fixed and completely flexible however, are heterogeneous approaches. They have different implications for the extent to which national authorities participate in foreign exchange markets.
Q10. Point out a merit of fixed exchange rate
Answer : Option B
Explaination / Solution:
Exchange rate stability, it is said, is necessary for orderly development of the international economy and rapid growth of world trade.
If the exchange rate is unstable or variable, the exporters will not be certain about the price they would receive for the goods to be expedited by them; the importers will not be certain about the price and the payments they have to make for their imports.2
