Free The Open Economy 02 Practice Test - 12th Grade - Commerce 

Question 1

Forward market is that market which:

A.

handles transactions of foreign exchange meant for future delivery

B.

handles current as well as future transactions.

C.

handles current transactions.

D.

None of these

SOLUTION

Solution : A

Forward market deals with foreign exchange transactions that are meant for future delivery. 

Question 2

If Rs 150 are required to buy $2, instead of Rs 100 earlier, then:

A.

both depreciation of the domestic currency and rise in the import bill occur

B.

rupee value of import bill will increase

C.

domestic currency has appreciated

D.

domestic currency has depreciated

SOLUTION

Solution : A

This is a case of depreciation, and the import bill rises as a result. 

Question 3

Which of the following items relate to BoP on capital account?

A.

Foreign investment

B.

NRI remittances

C.

Loans

D.

All of these

SOLUTION

Solution : D

The capital account looks at NRI deposits, loans and foreign investment. 

Question 4

Autonomous items are related to those transactions which:

A.

are not concerned with the equilibrium status of BoP

B.

are determined by the motive of profit

C.

both of the given options

D.

none of these

SOLUTION

Solution : C

Autonomous items have profit-motive and take place regardless of the BoP. 

Question 5

Current account records transactions relating to:

A.

export and import of goods

B.

current transfers

C.

non-factor and factor income

D.

all of these

SOLUTION

Solution : D

Current account looks at all these items. 

Question 6

The sale and purchase of financial assets is not a part of the BoP. State true or false.

A.

True

B.

False

SOLUTION

Solution : B

The given statement is false. Financial assets are a part of the BoP.

Question 7

Calculate trade balance if exports are 500 and imports are 900.

A.

-400

B.

400

C.

500

D.

1,400

SOLUTION

Solution : A

The trade balance is exports minus imports.

Question 8

Payment for shipping is a:

A.

Visible item

B.

Factor service payment

C.

Non-factor service payment

D.

Not an item in the BOP

SOLUTION

Solution : C

Payment for shipping is a non-factor service payment.

Question 9

Invisible items are:

A.

Goods

B.

Services

C.

Migration of people

D.

None of the above

SOLUTION

Solution : B

Services are invisible items.

Question 10

PepsiCo in India is a form of Foreign Portfolio Investment. State true or false.

A.

True

B.

False

SOLUTION

Solution : B

PepsiCo is an enterprise so it is part of foreign direct investment.

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