AMITY INTERNATIONAL SCHOOL, MAYUR VIHAR
SUBJECT: ECONOMICS
CLASS: XII
CHAPTER 12: BALANCE OF PAYMENTS
DATE:
COMPETENCY BASED QUESTIONS
CUET AND CBSE MCQ:
1. Which of the following best defines 'Unilateral Transfers' in the context of international transactions?
(a) Funds transferred internationally as loans for a specified tenure and interest rate.
(b) Trade transactions involving goods and services between two countries.
(c) Payments made by one party without expecting any return in the future.
(d) Investments made by a country in the stock market of another country
2. “The World Bank has been extending loans to Country X on favourable terms for infrastructure, poverty
alleviation, and rural development projects for four decades.” Identify the reason for these loans to be listed as
external assistance under the capital account of the Balance of Payments.
(a) The loans have been taken from an entity outside the country.
(b) The loans aim to improve the standard of living in the country.
(c) The loans have crossed the three-decade period.
(d) The loans can be paid off over a longer period.
3. Read the statements and choose the correct option.
Statement (1): The Balance of Payments is a key economic indicator of a country’s economic well-being.
Statement (2): It is a summary of all economic transactions of a country and the rest of the world in a given
financial year.
(a) Statement 1 is true and statement 2 is false
(b) Statement 1 is false and statement 2 is true
(c) Both statements 1 and 2 are true
(d) Both statements 1 and 2 are false
4. The money exchanged in which of the following situations will not be considered as Invisible items under
the Balance of Payments?
(a) An Indian flying to the US for his medical treatment.
(b) Oil India Limited (OIL) purchasing crude oil from Iraq.
(c) The Indian diaspora remitting money to their families at home
(d) Tata consultancy services (TCS) providing cloud consulting to African nations.
5. Identify the situation that can be certainly deduced from a "capital and current account equilibrium"?
(a) The current account deficit is financed by the selling of foreign exchanges.
(b) There is an inverse relationship between the current and the capital account.
(c)The capital account has to be equal to the current account to achieve equilibrium.
(d) The country is running into an economic deficit and requires borrowing from foreign reserves
6.“Trade deficit must exist, if a country is facing situation of Current Account Deficit”. Defend or refute the
above mentioned statement with valid arguments.
7. Venture capital refers to the funding provided by investors to small or start-up businesses with strong
potential for growth. In light of the above statement, how does the process of devaluation of a currency affect
Foreign Direct Investment or Portfolio investment?
AISMV/SR-24/ECO/WS
8. Elucidate the distinction between Autonomous Items and Accommodating Items concerning a nation's
Balance of Payments. Give examples to demonstrate country's international economic interactions.
9. “Accommodating transactions are undertaken to maintain stability in Balance of Payment Account”. Justify
the given statement with valid explanation.
10. a) When does a Current Account Surplus situation arise?
b) Discuss its significance in an economy
AISMV/SR-24/ECO/WS
