Mock Test – Balance of Payments

1. Assertion (A): Other things being equal, increase in demand for foreign exchange leads to upvaluation of foreign currency.

Reason (R): Increase in demand for foreign exchange shows shortage of foreign currency in Indian reserve.

2. Equilibrium in Balance of Payments is achieved when the net value of all the receipts and payments is __________ .

3. The exchange rate at which demand for foreign currency becomes equal to its supply is called:

4. Which of the following will be debited in Capital Account of India’s Balance of Payments Account?

5. Foreign exchange transactions dependent on other foreign exchange transactions are called:

6. An Indian company located in India invests in a company located abroad. This transaction is entered in India’s Balance of Payments Account on:

7. Identify which of the following is not an example of ‘invisible item’ under Current Account of the Balance of Payments transactions:

8. Other things remaining the same, when in a country the market price of foreign currency falls, national income is likely:

9. Unilateral transfers are a part of:

10. Which of the following items is an invisible item in balance of payments account?

11. Exports and lmports of which of the following items will be a component of ‘Balance of Trade’?

12. If the price of 1 US$ has fallen from  56 to  52, the Indian currency has:

13. If the price of 1 US$ has fallen from  56 to  52, the Indian currency has:

14. Ms. Kiran, an economics teacher, was explaining the concept of ‘exchange rate which is determined by the free play of market forces of demand and supply of foreign exchange in the foreign exchange market’. From the following, choose the correct alternative which specifies the concept explained by her.

15. Foreign exchange transactions which are independent of other transactions in the Balance of Payments Account are called:

16. Balance of Trade refers to balance of exports and imports of:

17. The following information is given for an imaginary country:

Sr.No.	Items	Amount (in crores)
(i) (ii)	Balance of Trade (BoT) Exports	(–) 800 500

Which of the given statements is true with regards to value of imports?

18. An Indian real estate company receives rent from Google in New York. This transaction would berecorded on __________ side of __________ account.

19. Identify which of the following statements is true?

20. “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.

21. Statement 1: Export of financial services by India will be recorded on credit side of current account.

Statement 2: Foreign Direct Investments in India will be recorded on credit side of capital account.

22. Statement 1: Devaluation of the Indian rupee in 1991 resulted in the inflow of foreign exchange.

Statement 2: Devaluation of the Indian rupee was a step to get taken to get more foreign investments.

23.  

The following information is given for an imaginary country:

Current Account	Amount (in ‘000 crore)
Visible Exports Visible Imports Invisible Exports Invisible Imports Net current transfer balance	100 150 70 30 15

Balance on current account will be ________ of  ________ thousand crore.

24. Assertion (A): Trade of invisible items between two nations is a part of capital account of Balance of Payment.

Reason (R): Transactions that affect the asset-liability status of a country in relation to rest of the world are known as capital account transactions.

25. What is the relationship between demand for foreign exchange and exchange rate?

26. Observe the given image carefully and identify the depicted economic issue for Indian rupee.

27. Other things remaining the same, when foreign currency becomes cheaper, the effect on national income is likely to be :

28. The exchange rate determined by the free play of the forces of demand and supply of foreign exchange is:

29. Suppose, following data is presented, for an imaginary economy: (all figures in ` 000 crore)

Identify, which of the statements about the period 2010 to 2020 is correct?

30. From the following, which of the items would appear on the credit side of capital account of the balance of payment in India?