Free The Open Economy 03 Practice Test - 12th Grade - Commerce 

Question 1

In which of the following categories are the transactions of balance of trade recorded?

A.

Visible items

B.

Capital transfers

C.

Invisible items

D.

All of these 

SOLUTION

Solution : A

Balance of trade only looks at visible items in the BoP. 

Question 2

Which of the following are not included in balance of trade?

A.

Payment of interest and dividend

B.

Borrowing from rest of the world

C.

Expenditure by the tourists

D.

All of these

SOLUTION

Solution : D

None of the above are visible items. Hence, they are not included in the balance of trade. 

Question 3

If the value of visible exports exceeds the value of visible imports, the balance relates to:

A.

current account BoP

B.

balance of trade

C.

capital account BoP

D.

none of these

SOLUTION

Solution : B

This is part of the balance of trade. 

Question 4

Accommodating items are those items of BoP which:

A.

lead to increase or decrease in official reserves with RBI

B.

are not determined by considerations of profit

C.

are conditioned by the positive or negative BoP status

D.

all of these

SOLUTION

Solution : D

Accommodating items have no profit-motive, are determined on the stance of the BoP and affect the level of reserves. 

Question 5

If balance of trade is (-) Rs 600 crore and the value of exports is Rs 500 crore, then the value of imports will be:

A.

Rs 1200 crore

B.

Rs 1100 crore

C.

Rs 300 crore

D.

Rs 1300 crore

SOLUTION

Solution : B

Imports = Exports - Balance of Trade  = 500- (-600) = 1,100

 

Question 6

If balance of trade is showing a deficit of Rs 200 crore and the value of exports is Rs 700 crore, then, the value of imports would be:

A.

Rs 900 crore

B.

Rs 700 crore

C.

Rs 500 crore

D.

Rs 200 crore

SOLUTION

Solution : A

Imports = Exports - Balance of Trade = 700 - (-200) = 900

 

Question 7

The ability to choose between stocks in India and stocks in the US for investment is a part of ___linkage.

A.

Consumption

B.

Financial markets

C.

Factor markets

D.

None of the above

SOLUTION

Solution : B

This is part of a financial markets linkage.

Question 8

Imports of goods is included in the:

A.

Current Account

B.

Capital Account

C.

Official Reserves Account

D.

None of the above

SOLUTION

Solution : A

Imports of goods appears in the current account.

Question 9

Borrowings belong to:

A.

Current account

B.

Capital account

C.

Official Reserves Account

D.

None of the above

SOLUTION

Solution : B

Borrowings belong to the capital account.

Question 10

Unilateral transfer payments are a source of:

A.

Demand for foreign exchange

B.

Supply of foreign exchange

C.

Both a and b

D.

Neither a nor b

SOLUTION

Solution : C

Unilateral transfers give rise to both demand and supply of foreign exchange.

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