Unit-III

Q:1 Whenever the central bank offers securities in the open market, the credit creation
capability of the banking industry is expected to

1. 1. Fall
2. Rise
3. No effect
4. May rise or may fall
Answer: (B) Rise

Explanation

when the central bank sells stocks and bonds in the market. Because these investments are safe, most
people buy them. When they pay, they write out a check from their account at the commercial bank to
pay for things. The amount of money in the bank falls.

Q:2 What distinguishes a bank from other financial institutions?

1. 1. Accepting time deposits as a courtesy

2. Accepting demand deposits
3. Lending
4. Accepting loans and borrowings
Answer: (B) Accepting demand deposits

Explanation

Demand deposits are exclusively accepted by the bank, not by any other financial institution. The
money in the account can be withdrawn at any time by the Depositor via check, ATM, or online
banking. Demand deposits include things like savings and checking accounts.

Q:3 Given CRR = 4% and SLR = 16%, the value of the money multiplier is:

1. 1. 5
2. 25
3. 8.33
4. 6.25
Answer: (A) 5

Explanation

Money Multiplier corresponds to 1/LRR. LRR is equivalent to SLR plus CRR. Hence Money
Multiplier denotes 1/20%. And after trying to solve it comes to 5.

Q:4 On which things were not included in the Supply of money measure?
1. 1. inter-bank deposits
2. Demand deposits with financial institutions on a net basis
3. Currency and coins are available to the general population
4. Deposits with the Reserve Bank of India (RBI) in addition to the above
Answer: (A) inter-bank deposits

Explanation

Currency and coins with the public, as well as Net Demand deposits with banks, and other deposits
with the RBI, make up the money supply.

Q:5 The term “Money Supply” relates to:

1. 1. Overall money held by the general public over a specified period of time
2. The total volume of money held by the public at a particular point in time
3. The total amount of money that the government possesses.
4. Both a) and b)
Answer: (B) Total volume of money held by the public at a particular point in time

Explanation

The money supply is a stock concept, and it is the money held by the public in the form of coins and
currency and public deposits in the bank at a point in time.

Q:6 The amount of money in India is controlled by?

1. 1. Planning Commission
2. Commercial Banks
3. Government of India
4. Reserve Bank of India
Answer: (D) Reserve Bank of India

Explanation

It is the country’s central bank, the Reserve Bank of India (RBI). The money supply is controlled by
the country’s central bank.

Q:7 If indeed the deposits made by banks are ₹ 10,000 crore and legitimate reserve
requirements are 40 percent, then the amount of initial deposits will be

1. 1. ₹ 4000 crore
2. ₹ 14000 crore
3. ₹ 3000 crore
4. ₹ 2000 crore
Answer: (A) ₹ 4000 crore

Explanation

The money multiplier equals 2.5. So dividing 10,000 by 2.5, we arrive at an initial deposit figure of
4000 crores.

Q:8 To help the country’s credit situation, the RBI may:

1. 1. Repo Rates Should Be Reduced

2. Purchase stocks and bonds in the open market.
3. Reduce the cash reserve to debt ratio.
4. Sell securities in the open market
Answer: (D) Sell securities in the open market

Explanation

Selling security on the open market decreases a commercial bank’s deposit base. Additionally, it
limits lending capability.

Q:9 Which of the following isn’t really a central bank’s responsibility:

1. 1. Banking facilities for the public

2. Providing credit to commercial banks
3. Providing financial assistance to the government
4. Banking facilities for government
Answer : (A) Banking facilities for the public

Explanation

The central bank doesn’t really offer financial services to the general public. It provides banking
services to both public and private banks.

Q:10 Which bank is in charge of India’s banking and monetary system?

1. 1. State Bank of India

2. Axis Bank
3. World Bank
4. Reserve bank of India
Answer: (D) Reserve bank of India

Explanation
The central bank is empowered to regulate the banking and monetary systems. In India, the central
bank is referred to as the Reserve Bank of India.

Q:11 What is the value of the money multiplier when initial deposits are ₹500 crores and LRR
is 10%.

1. 1. 0.2
2. 0.1
3. 10
4. 20
Answer: (C) 10

Explanation

Money Multiplier is 1/LRR, which equates to ten times.

Q:12 What happens when margin requirements are increased.

1. 1. There has been no change in the amount of money in circulation.

2. more likely to borrow more money resulting in a rise in the money supply
3. It decreases borrowing capacity and money supply
4. None of the following
Answer: (C) It decreases borrowing capacity and money supply

Explanation

The margin requirement is the difference between the value of the mortgage security and the amount
of the loan. The higher the margin requirement, the smaller the loan amount. A smaller loan amount
dissuades the borrower from obtaining a loan from the bank.

Q:13 Identify the institution that accepts deposits, makes loans, and makes investments with the
intent of profiting.

1. 1. Neither
2. Central Bank
3. Both 1 and 2
4. commercial Bank
Answer: (D) Commercial Bank

Explanation

Commercial banks accept all types of deposits, advance loans, and invest deposit money in various
investment schemes in order to earn profit.

Q:14 Commercial banks create money in the following ways:

1. 1. Issuing currency
2. Creation of bank deposits
3. Neither (1) nor (2)
4. Both (1) and (2)
Answer: (B) Creation of bank deposits

Explanation

Loans are made by commercial banks using bank deposits received from depositors. When a bank
makes a loan, it does not make a cash payment. A demand deposit account is opened in the
borrower’s name, and the loan proceeds are placed there. The borrower may pay from these demand
deposits through a cheque, ATM, or internet banking.

Q:15 The central bank’s reduction of the CRR has the following effect on the commercial
banks’ capacity to create credit:

1. 1. Positive
2. No effect
3. Negative
4. Can be negative or can be positive
Answer : (A) Positive

Explanation

Reduced CRR increases the level of deposits available for lending. It increases the commercial bank’s
lending capacity.

Q:16 By lowering the central bank’s margin requirements, borrowers’ borrowing capacity
increases:

1. 1. Falls
2. No effect
3. Rises
4. May rise or may fall
Answer: (C) Rises

Explanation

Lending Rates are the difference between the Collateral security’s face value and the loan amount
specified. The smaller the margin restrictions, the larger the sanctioned loan amount.

Q:17 Which of the statements below is true?

1. 1. M3 is the most liquid money supply measure

2. M2 is the most liquid money supply measure
3. M1 is the most liquid money supply measure
4. All of the statements are true
Answer: (C) M1 is the most liquid money supply measure

Explanation

M1 is a group of assets that can be easily traded for goods and services. These assets are called M1. It
includes coins and money that are in circulation and that people use to pay for things and services.

Q:18 Which of the following is not true?

1. 1. term deposits aren’t legal currency

2. wheat is not legal tender
3. Demand deposits are not legal tender
4. issued currency notes are not legal tender
Answer: (D) issued currency notes are not legal tender

Explanation

A legal tender is a form of money that a court of law must accept as sufficient payment for any
financial department. Coins and notes are the Reserve Bank of India’s recognised legal money in
India.

Q:19 Which one of the below is not a central bank function?

1. 1. Lending to commercial banks

2. Banking facilities for public
3. Financial services to the government
4. Lending to government
Answer: (B) Banking facilities for public

Explanation

Commercial banks interact directly with the public by receiving and lending deposits.

Q:20 What happens when margin requirements are increased.

1. 1. It decreases borrowing capacity and money supply

2. It increases borrowing capacity and money supply
3. It encourages people to borrow more, resulting in a rise in the money supply.
4. There is no change in the money supply
Answer: (A) It decreases borrowing capacity and money supply
Explanation

The margin requirement is the difference between the value of the mortgage security and the loan
amount. The higher the margin requirement, the smaller the loan amount. A smaller loan amount
dissuades the borrower from obtaining a loan from the bank.

Q:21 Which of the following is the closest to the money?

1. 1. Securities
2. Bonds
3. Insurance policy
4. All of these
Answer: (D) All of these

Explanation

The term “near money” refers to non-monetary assets that can be converted into cash quickly because
of their high liquidity. Bills of exchange, savings bonds, and gilt-edged securities, for example, are
considered close to money since they are liquid assets that may be easily turned into cash.

Q:22 The central bank can boost the availability of credit in a number of ways, including:

1. 1. Selling government securities

2. Buying government securities
3. Raising reverse repo rate
4. Raising repo rate
Answer: (B) Buying government securities

Explanation

This leads to the transfer of money from the Central bank to the commercial banks, as well as an
increase in the credit creation capacity of the financial institutions. As a result, the central bank has
the capacity to boost the supply of credit by purchasing government assets.

Site n
Q23. Choose the incorrect statement
1. Anything that would act as a medium of exchange is money
2. Money has generalized purchasing power and is generally acceptable in settlement of all
transactions
3. Money is a totally liquid asset and provides us with means to access goods and services
4. Currency which represents money does not necessarily have intrinsic value.
Answer: 1
Q24. Money performs all of the three functions mentioned below, namely
1. medium of exchange, price control, store of value
2. unit of account, store of value , provide yields
3. medium of exchange, unit of account, store of value
4. medium of exchange, unit of account, income distribution
Answer: 3

Q25. Demand for money is

1. Derived demand
2. Direct demand
3. Real income demand
4. Inverse demand
Answer: 1

Q26. Higher the ----------------------, higher would be -----------------------of holding cash and lower
will be the --------------------------------
1. demand for money, opportunity cost, interest rate
2. price level , opportunity cost, interest rate
3. real income , opportunity cost, demand for money
4. interest rate, opportunity cost, demand for money
Answer: 4

Q27. The Cambridge approach to quantity theory is also known as

1. Cash balance approach
2. Fisher’s theory of money
3. Classical approach
4. Keynesian Approach
Answer: 1

Q28. Reserve money is also known as

1. central bank money

2. base money
3. high powered money
4. all the above
Answer: 4

Q29. Choose the correct statement from the following

1. Money is deemed as something held by the public and therefore only currency held by the
public is included in money supply.
2. Money is deemed as something held by the public and therefore inter-bank deposits are included
in money supply.
3. Since inter-bank deposits are not held by the public, therefore interbank deposits are excluded
from the measure of money supply.
4. Both (a ) and (c) above.
Answer: 3

Q30. Reserve Money is composed of

1. currency in circulation + demand deposits of banks (Current and Saving accounts) + Other
deposits with the RBI.
2. currency in circulation + Bankers’ deposits with the RBI + Other deposits with the RBI.
3. currency in circulation + demand deposits of banks + Other deposits with the RBI.
4. currency in circulation + demand and time deposits of banks + Other deposits with the RBI.
Answer: 2

Q31. M1 is the sum of

1. currency and coins with the people + demand deposits of banks (Current and Saving accounts) +
other deposits of the RBI.
2. currency and coins with the people + demand and time deposits of banks (Current and Saving
accounts) + other deposits of the RBI.
3. currency in circulation + Bankers’ deposits with the RBI + Other deposits with the RBI
4. none of the above
Answer: 1

Q32. Under the’ minimum reserve system’ the central bank is

1. empowered to issue currency to any extent by keeping an equivalent reserve of gold and foreign
securities.
2. empowered to issue currency to any extent by keeping only a certain minimum reserve of gold
and foreign securities.
3. empowered to issue currency in proportion to the reserve money by keeping only a minimum
reserve of gold and foreign securities.
4. empowered to issue currency to any extent by keeping a reserve of gold and foreign securities to
the extent of ` 350 crores
Answer: 2

Q33. The primary source of money supply in all countries is

1. the Reserve Bank of India
2. the Central bank of the country
3. the Bank of England
4. the Federal Reserve
Answer: 2

Q34. Which of the following is the function of monetary policy?

1. regulate the exchange rate and keep it stable
2. regulate the movement of credit to the corporate sector
3. regulate the level of production and prices
4. regulate the availability, cost and use of money and credit
Answer: 4

Q35. The main objective of monetary policy in India is _______:

1. reduce food shortages to achieve stability
2. economic growth with price stability
3. overall monetary stability in the banking system
4. reduction of poverty and unemployment
Answer: 2

Q36. The monetary transmission mechanism refers to

1. how money gets circulated in different sectors of the economy post monetary policy
2. the ratio of nominal interest and real interest rates consequent on a monetary policy
3. the process or channels through which the evolution of monetary aggregates affects the level of
product and prices
4. none of the above
Answer: 3

Q37. A contractionary monetary policy‐induced increase in interest rates

1. increases the cost of capital and the real cost of borrowing for firms
2. increases the cost of capital and the real cost of borrowing for firms and households
3. decreases the cost of capital and the real cost of borrowing for firms
 4. has no interest rate effect on firms and households
Answer: 2

Q38. ---------------- is a money market instrument, which enables collateralised short term
borrowing and lending through sale/purchase operations in debt instruments.
1. OMO
2. CRR
3. SLR
4. Repo
Answer 1

Q.39 Which of the following describes the correct scenario if the Government of India fails to
pass the budget?
a. The entire council of ministers have resigned and the government falls down
b. The Finance Minister requests the speaker of the house for extra time to pass the
budget
c. The budget from the last year continues
d. None of the above
Answer: a
Q.40. Which of the following is the correct meaning for the revenue budget?
a. It is the difference between revenue expenditure and revenue receipts
b. It is the total revenue deficit excluding grants in aid to create assets for states
c. It is the total revenue deficit including grants in aid for developing assets for states
d. It is the difference between total expenditure and total receipts
Answer: b
Q. 41. One of the most significant fiscal policy objectives in India is to bring the revenue
expenditures and receipts to the same level. Which of the following steps will help to achieve
that objective?
a. The efforts to raise the total profits for public sector units
b. The efforts to improve the revenues from tax collection
c. The efforts to slow the growth rate for expenditures in the country
d. All of the above
Answer: d
Q.42. Which of the following agencies is responsible for formulating the Fiscal Policy in India?
a. Securities and Exchange Board of India (SEBI)
 b. Reserve Bank of India (RBI)
c. Ministry of Finance, Government of India
d. National Bank for Agricultural and Rural Development (NABARD)
Answer: c
Q.43. Which of the following items is classified as a Capital Receipt in the budget for the
Government of India?
a. The receipts from the collection of income tax
b. The borrowings made by the government from the public
c. The dividends and profits received from the public sector units
d. The interest receipts for loans given by the government to its debtors
Answer: b
Q.44. The importance of fiscal policy in a country like India is that ___________.
a. It plays a major role in increasing the rate of formation of capital both for public and
private sector units
b. It aims to reduce the imbalance in the distribution of income and wealth
c. It helps to generate sufficient resources, through direct and indirect taxes, to finance
the government projects
d. All of the above
Answer: d
Q.45. Which of the following is not a part of the revenue receipts for the Government of India?
a. The receipts from the collection of interest amount from its debtors
b. The receipts from the collection of corporate taxes
c. The dividends and profits received from the public sector units
d. The receipts from disinvestment of public sector undertakings
Answer: d
Q.46. Which of the following is the definition of a budget deficit?
a. Excess of the total expenditure over the total receipts minus interest payments and
borrowings
b. Excess of the total expenditure over the total receipts minus borrowings
c. Excess of the revenue expenditure over the revenue receipts
d. Excess of the total expenditure over the total receipts
Answer: d
Q.47. Which of the following is a development that can occur as a result of deficit financing?
 a. The rise in inflation within the Indian economy
b. The improvement in money supply in the Indian economy
c. The increase in government debt
d. All of the above
Answer: d
Q.48.Which of the following steps under the fiscal policy is an example for stabilising the
economy?
a. Making payments towards unemployment insurance benefits
b. Making payments towards pensions for retired military personnel
c. Allocating more capital for spending on construction of national highways
d. Decreasing the supply of money within the economy
Answer: a
Q.49.Which of the following steps under the fiscal policy is an example for stabilising the
economy?
a. Making payments towards unemployment insurance benefits
b. Making payments towards pensions for retired military personnel
c. Allocating more capital for spending on construction of national highways
d. Decreasing the supply of money within the economy
Answer: a
Q.50.Which of the following is included as a part of the capital budget for the government of
India?
a. Loans provided to foreign governments
b. Financial assistance provided by institutions like the World Bank and International
Monetary Fund
c. Expenditure made towards acquiring of foreign aircrafts
d. All of the above
Answer: d
Q.51. Which of the following is the best explanation for ‘Capital Gains Tax’ in India?
a. It is a tax levied on the profits from the selling of shares that were held for more than
12 months
b. It is a tax levied on the interest that was received from bank fixed deposits
c. It is a tax levied on the profits from the sale of a capital asset during the financial year
d. It is the tax levied on dividends received from corporate bonds
Answer: c
Q.52.Which of the following is not a part of the development expenditure undertaken by the
Government of India?
a. The grants provided to state governments
b. The expenditure towards providing community and social services
c. The expenditure towards providing economic services
d. The expenditure as a part of the defence budget
Answer: d
Q.53. Which of the following is true about the annual budget prepared by the Government of
India?
a. It is a part of the money-saving policy of the government
b. It is a part of the fiscal policy of the government
c. It is a part of the monetary policy of the government
d. It is a part of the commercial policy of the government
Answer: b
Q.54. Name the policy that accords with expenditure and taxation policies decisions of the
government?

1. 1. Monetary Policy
2. Fiscal Policy
3. Labor Market Policies
4. Trade Policy
Ans Option B – Fiscal Policy

Fiscal Policy deals with decision-making in expenditure and taxation policies by the government.

Q.55.Which tax among the following generates the maximum amount of revenue for the
government of India?

1. 1. Custom Duties
2. Income Tax
3. Corporate Tax
4. Sales Tax
Ans Option C – Corporate Tax

The corporate tax is also considered to be the single largest form of income for the government of
India.
Q.56. As per the reports of the Union Budget of 2021-22, state the number of the regional
national institute of virology will be set up?

1. 1. Two
2. Seven
3. One
4. Four
Ans Option D – Four

As per the rules of Union Budget 2021-22, the Central Government had decided to set up four
regional national institutes of virology.

Q.57. Who leads the Goods and Services Tax or the GST tax of India?

1. 1. President
2. Prime Minister
3. Finance Minister
4. Home Minister
Ans Option C – Finance Minister

The Famous tax of India the Goods and Services Tax is looked out by the finance minister of India.

Q.58. See the following names of taxes and tell which one is not included in the Goods and
Services Tax?

1. 1. Corporate Tax
2. Service Tax
3. Custom Duty
4. Value Added Tax
Ans Option – C Custom Duty

The customs duty is taxes that are not included in GST taxes.

Q.59. If the grants for the creation of capital Assets are deleted from the revenue deficit, then
what will be the scenario?

1. 1. Fiscal Deficit
2. Effective Revenue Deficit
3. Primary Deficit
4. Budget Deficit
Ans Option – B Effective Revenue Deficit
According to the formula of ERD, Effective Revenue Deficit = revenue deficit – grants for the
creation of the capital asset.

Q.60. Tell which among the following can be considered an instance of Direct taxes?

1. 1. Sales Tax
2. Wealth Tax
3. Entertainment Tax
4. Value Added Tax
Ans Option B – Wealth Tax

Wealth Tax is an example of Direct taxes.

Q.61.Which work among the following is not part of the legislature organ of India?

1. 1. Making Law
2. Budgeting
3. Approving a budget
4. Regulations of executive
Ans Option B – Budgeting

The budget is maintained and made by the Department of Economic Affairs of the Ministry of
Finance. The head of this committee is the finance minister who is a member of the executive.

Q.62. Thing that is not included in the central government Development spending?

1. 1. Defense Expenditure
2. Economic Service Expenditure
3. Grants provided to state
4. Spending on social and community services
Ans Option A – Defence Expenditure

The central government Development Expenditure never consist of the defense Expenditure, it was
looked at by the government of India.

Q.63. In which year railway budget was being merged with the general budget?

1. 1. Budget 2016-17
2. Budget 2020-21
3. Budget 2017-18
4. Budget 2014-15
Ans Option – C Budget 2017-18
In the Budget for 2017-18, the railway budget and general budget were being merged under one roof
and it was approved on September 21, 2016.

Q.64. Identify the following, budget is an important part of whom

1. 1. Fiscal Policy of Government

2. Legislature
3. Commercial Policy of Government
4. Monetary Policy of Government
Ans Option A – Fiscal Policy of Government

The budget is a very important part of the Fiscal Policy of the Government.

Q.65. From which year did the merged railway and general budget start?

1. 1. 2017-18
2. 2018-19
3. 2014-15
4. 2015-16
Ans Option A- 2017-18

The two budgets were being merged on the recommendation of a committee chairman of Niti aayog,
this policy was being approved on September 21, 2016. And new budget system came into being in
budget 2017-18.

Q.66. Which one among the following is not a part of Tax revenue in the state government of
India?

1. 1. Registration Fee
2. Commercial Tax
3. Custom Duty
4. Land Revenue
Ans Option C – Custom Duty

Customs duties are taxes that are imposed on the import and export of goods.

Q.67. Which of the following is a railway budget?

1. 1. Part of the state budget

2. Part of the Central budget
3. Not part of the central budget
4. Not part of the state budget
Ans Option B – Part of the Central budget

The railway budget is an important part of the central budget.

Q.68. Which scheme among the following was announced in the Union Budget of 2022?

1. 1. Make in India
2. Ease of Doing Business
3. Pradhan Mantri Shram Yogi Maandham
4. Aatmanirbhar Bharat
Ans Option B – Ease of Doing Business

On February 1, 2022, Union Finance Minister Nirmala Sitaraman declared that the government will
launch the next phase of the Ease of Doing Business scheme and this new phase was called “Ease of
Doing Business 2.0 “.

Q.69. What is the process called when the total revenue of government without borrowing is less
than the total expenditure

1. 1. Fiscal Deficit
2. Monetary Deficit
3. Deficit Financing
4. Budget Shortfall
Ans Option A – Fiscal Deficit

Fiscal Deficit = Total Expenditure – Total revenue excluding the borrowings.

Q.70. Which one among the following is the base year of the Rajasthan Sales Price index

1. 1. 1986-87
2. 1999-2000
3. 2004-03
4. 2013-14
Ans Option A – 1999-2000

According to the office of the Economic and statistics department, the base year of the Rajasthan
Sales Price index is 1999-2000.

Q.71. Which one among the following is a tool of Fiscal Policy?

1. 1. Government Research
2. Election
3. Taxation
4. None of the above
Ans Option C – Taxation

As discussed in the introduction, Taxation and tax policies are very important tools of Fiscal Policy.

Q.72.Which one among the following is included in the current account with the balance of
payment

1. 1. Trade-in goods
2. Remittances
3. Transfer Payments
4. FII
5. Trade-in Services
6. Gifts
7. Loans by the world bank and IMF
8. Invisible Trade
9. FDI
Ans Usually a capital account consists of FDI, borrowing, quota to IMF, external bonds, issued
gifts, and donations that come under the roof of the capital account

Q.73. Which criteria among the following will help in showing the fiscal condition of an
economy for the current year?

1. 1. Revenue Deficit
2. Fiscal Deficit
3. Effective Revenue Deficit
4. Primary Deficit
Ans Option B – Fiscal Deficit

Fiscal Deficit is considered to be the best source of representation for government deficit Conditions
and along with this fiscal Deficit also briefly shows the expenditure and revenue of government in a
massive sense and estimate.

Q.74. Which one among the following is the correct definition of capital gains tax in India?

1. 1. Tax on benefit from the sale of the capital asset during a particular year
2. Tax encountered on profit from the sale of shares held for more than a year
3. Tax levied on interest received from the fixed deposit of bank
4. Tax on dividends earned from corporate bonds
Ans Option A – Tax on profit from a sale of the capital asset during a particular year.

A Capital Gain tax is a tax that is a profit encountered on the sale of the non-inventory asset.

Q.75.Balance of Payments is an accounting statement that records monetary transactions

between ________.
a. Residents of a nation and the rest of the world
b. Non-residents and the rest of the world
c. Residents of a nation and non-residents
d. None of the above
Answer: a
Q.76. Balance of Payments uses the _________ system of accounting.
a. Single-entry
b. Double-entry
c. Cash basis
d. Accrual basis
Answer: b
Q.77.The ‘resident’, whose monetary transactions get recorded under the Balance of Payments
system, includes _______.
a. Government agencies
b. Individuals
c. Firms
d. All of the above
Answer: d
Q.78.The components of a Balance of Payment account are ____________.
a. Capital Account
b. Current Account
c. Both a and b
d. None of the above
Answer: c
Q.79.The Balance of Payment account records the inflow of foreign exchange on the _______.
a. Debit side
b. Credit side
c. Both a and b
d. None of the above
Answer: b
Q.80. Balance of trade is the ___________.
a. Difference between export and import of services
b. Total of export and import of services
c. Difference between export and import of goods
d. Total of export and import of goods
Answer: c
Q.81. Which of the following is not a component of the Balance of Payments?
a. Real account
b. Current account
c. Capital account
d. None of the above
Answer: a
Q.82.Import and export of goods are known as _____.
a. Nominal trade
b. Invisible trade
c. Visible trade
d. None of the above
Answer: c
Q.83.Import and export of services are known as ________.
a. Nominal trade
b. Invisible trade
c. Visible trade
d. None of the above
Answer: b
Q.84. Import of machinery and equipment is recorded under __________ of the ______ account.
a. Credit side, capital
 b. Debit side, capital
c. Debit side, current
d. Credit side, current
Answer: c

Q.85. Gifts or grants received from outside the country get recorded under __________ of the
______ account.
a. Credit side, capital
b. Debit side, capital
c. Debit side, current
d. Credit side, current
Answer: d
Q.86. The Current account of the Balance of Payments includes transactions like ___________.
a. Imports and exports of goods and services
b. Transfers to and from abroad
c. Income to and from abroad
d. All of the above
Answer: d
Q.87. The Capital account of the Balance of Payments includes transactions like ___________.
a. Changes in foreign exchange reserves
b. Investments to and from abroad
c. Borrowings and lendings to and from abroad
d. All of the above
Answer: d
Q.88. Balance of payments is a ___________ concept as compared to balance of trade.
a. Broader
b. Similar
c. Narrower
d. None of the above
Answer: a
Q.89. Trade Deficit occurs when ______________.
 a. Export of goods is less than imports of goods
b. Export of goods is more than imports of goods
c. Export of services is less than imports of services
d. Export of services is more than imports of services
Answer: a
Q.90. A business organisation located within India gets a loan from a foreign-based company.
This transaction is recorded in the ____________ of ____________ account within the Balance
of Payment account of India.
a. Debit side, current
b. Credit side, current
c. Debit side, capital
d. Credit side, capital
Answer: d
Q.91. Foreign exchange transactions that are independent of other activities in the Balance of
Payments account are ________ transactions.
a. Capital account
b. Current account
c. Accommodating
d. Autonomous
Answer: d
Q.92. Foreign exchange transactions that are dependent on other activities in the Balance of
Payments account are __________ transactions.
a. Capital account
b. Current account
c. Accommodating
d. Autonomous
Answer: c
Q.93. When payments of foreign exchange are more than receipts, then the Balance of Payments
is __________.
a. Surplus
b. Deficit
c. Balanced
d. None of the above
Answer: b
Q.94. The transactions undertaken to cover the deficit or surplus of autonomous transactions
are called __________.
a. Accommodating transactions
b. Capital account transactions
c. Current account transactions
d. None of the above
Answer: a
Q.95. The measures taken to improve the negative Balance of Payments include ___________.
a. Exchange control
b. Currency devaluation
c. Import substitution
d. All of the above
Answer: d
Q.96.An increase in the foreign exchange reserve gets recorded on the _________ of the Balance
of Payments account.
a. Debit side
b. Credit side
c. Not added to any side
d. It can be added to any side
Answer: b
Q.97. Which of the following are a part of the Capital account of the Balance of Payments?
a. Foreign loans
b. Monetary movements
c. Foreign investments
d. All of the above
Answer: d
Q.98. Balance of Payments is an accounting statement for _________.
a. Business year
b. New year
c. Accounting year
d. All of the above
Answer: c
Q.99. The current account deficit is unfavourable for a country because it signifies ______.
a. Demerits for the nation
b. That the nation is a borrower from the rest of the world
c. The government does not have sufficient foreign exchange to finance its international
payment
d. Both b and c
Answer: d
Q.100. The interest amount on deposits from a foreign bank is recorded in the current account
because it is ______.
a. A transfer receipt
b. An income from abroad
c. An invisible service
d. A visible good
Answer: b
Q.101. If the value of visible exports is more than the value of invisible imports, the balance
relates to ____________.
a. Trade deficit
b. Capital account
c. Current account
d. It cannot be determined
Answer: d
Q.102. If the value of visible imports is more than the value of invisible exports, the balance
relates to ____________.
a. Trade deficit
b. Capital account
c. Current account
d. It cannot be determined
Answer: d
Q.103. If the trade deficit is Rs. 1000 crores and the import of goods is Rs. 2000 crores, then the
export of goods will be Rs. _________.
a. 2000 crores
b. 1000 crores
c. 1500 crores
 d. 500 crores
Answer: b