Revision test on BOP and Govt Budget Max marks 30

Duration 1 hr

1.Which of the following statement is not true?

a. Borrowing from the Asia development bank by the Government is an accommodating transaction.

b. Loans given to Srilanka by the Government are an accommodating transaction.

c. Buying of machinery from Japan is an accommodating transaction.

d. Borrowing from the public is an accommodating transaction.

2. If Japanese import less goods from India?

a. India's BoP will improve.

b. Japan's BoP will deteriorate.

c. India's BoP will deteriorate.

d. Both a) and b)

3. Make in India will increase the balance of

a. Debit side of BoP

b. Credit side of BoP

c. Both of these

d. None of these

4. An Indian real estate company paid rent to Google in New York. This transaction would be recorded on ________ side
______ account.

a. Credit , Current

b. Debit ,Current

c. Credit , Capital

d. Debit , Current

5. When the Government wants to strengthen the rupee, it _____ foreign currency and _____ domestic currency

a. Buys, sells b. Sells , Sells c. Sells , Buys d. Buys , Sells

6. Other things remaining unchanged, when in a country, the price of foreign currency rises, national income is :-

a. likely to rise b. likely to fall c. Likely to rise and fall both d. Not affected

6. Balance of payments is in equilibrium when:

(a) current account balance + capital account balance is not equal to zero

(b) current account balance + capital account balance is some positive number

(c) current account balance + capital account balance is some negative number
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(d) all of these

7. Balance of Payments account records:

a. A country’s inflow & outflow of foreign exchange during a fiscal year.
b. International transactions in goods, services and assets during a fiscal year.
c. Transactions affecting foreign exchange assets & liabilities during a fiscal year.
d. Transactions relating to exports & import of goods & services, and transfers during a fiscal year

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8.From the following given sets of statements in column I and II, chose the correct pair of statements.

Column I Column II
A Exports of goods and services (i) Excess of Exports of goods over the imports
of goods
B Trade Surplus (ii) An element of invisible items
C Current Transfers to rest of the world (iii) Recorded as a positive item in the BOP
account
D Portfolio Investments (iv) Foreign Institutional investors
Alternatives:
a) A-(i)
b) B-(ii)
c) C-(iii)
d) D-(iv)
9. Assertion (A): Trade of invisible items between two nations is a part of capital account of Balance of
Payment.

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 Reason (R): transactions that affect the asset liability status of a country in relation to
the rest of the world are known as capital account transaction.
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion(A)
b. Both Assertion (A) and Reason (R) are true and Reason (R) is not
the correct explanation of Assertion (A).
c. Assertion (A) is true but Reason (R) is false.
d. Assertion (A) is false but Reason (R) is true.
10. Identify the correct reason(s) that may affect the demand for foreign exchange in an economy.
I. Imports of visibles II. Exports of invisibles III. Remittances by residents working abroad IV. Purchase
of assets abroad
Alternatives:
a) I and II b) II and III c) III and IV d) I and IV
11. Suppose country X has more inflation than country Y, What is most likely to happen when other
factors are assumed to be constant?
a. A surplus trade balance country X
b. A deficit trade balance in country Y
c. A rise in export from country X
d. A deficit trade balance in country X
12. Suppose the price of US dollar changed from rs 80 to 85, due to market forces, this means the
value of Indian currency has
a. Appreciated
b. Depreciated
c. Devalued
d. Revalued
13. Ramesh Chand ,an,NRI send money to his family in India .This money is to be recorded in
…………..account and ------------ side of BoP.
14. If balance of trade is showing a deficit of ₹ 300 crore and value of imports is ₹ 800 crore , then
find out the value of exports ?
15. If the BOP of a country is in deficit, the impact of official reserve transaction will be shown as
a____________ entry (credit, debit) 15x1=15
16. Recently Government of India has doubled the import duty on gold. What impact is it likely to
have on foreign exchange rates and how? 3
17. A country with trade deficit cannot have current account surplus in its balance of payments. Do
you agree with the given statement? Give reasons.3
18. A current account deficit in an economy must be financed by a surplus in capital account. Do you
agree? Justify. 3
19. Distinguish between Autonomous and accommodating transactions of BOP. 3
20. Why does the demand for foreign exchange fall when the exchange rate rises? 3 5x3=15

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