Open Economy Macroeconomics Class 12 MCQs Questions with Answers
Question 1.
Which one is a king of exchange rate ?
(a) Fixed Exchange Rate
(b) Flexible Exchange Rate
(c) Both (a) and (b)
(d) None of the above
Answer
Answer: (c) Both (a) and (b)
Question 2.
Which of the following is true ?
(a) Fixed exchange rate is determined by the government
(b) Flexible exchange rate is determined by market forces (demand and supply of foreign exchange)
(c) Both (a) and (b)
(d) None of the above
Answer
Answer: (c) Both (a) and (b)
Question 3.
Which one is a kind of fixed exchange rate ?
(a) Gold Standard System of Exchange Rate
(b) Bretton Woods System of Exchange Rate
(c) Both (a) and (b)
(d) None of the above
Answer
Answer: (c) Both (a) and (b)
Question 4.
Which one is a merit of fixed exchange rate ?
(a) Promotes Foreign Trade
(b) Induces Foreign Capital
(c) Increases Capital Formation
(d) All the above
Answer
Answer: (d) All the above
Question 5.
Which one is a demerit of fixed exchange rate ?
(a) Ignores National Interests
(b) Restricted Movement of Capital
(c) Sudden Fluctuations in Exchange Rates
(d) All the above
Answer
Answer: (d) All the above
Question 6.
Which one is a merit of flexible exchange rate ?
(a) Simple System
(b) Continuous Adjustments
(c) Improves Balance of Payments
(d) All the above
Answer
Answer: (d) All the above
Question 7.
Which one is a demert of flexible exchange rate ?
(a) Bad Results of Low Rate
(b) Uncertainty
(c) Instability in Foreign Exchange
(d) All the above
Answer
Answer: (d) All the above
Question 8.
Which one is a source of the demand of foreign exchange ?
(a) Imports of Goods and Services from Abroad
(b) Investment in Foreign Nations
(c) Gift Scheme to Foreign Nations
(d) All the above
Answer
Answer: (d) All the above
Question 9.
Foreign exchange is determined by :
(a) Demand of foreign currency
(b) Supply of foreign currency
(c) Demand and supply in foreign exchange market
(d) None of the above
Answer
Answer: (c) Demand and supply in foreign exchange market
Question 10.
The forms of foreign exchange market is/are :
(a) Spot market
(b) Forward market
(c) Both (a) and (b)
(d) None of these
Answer
Answer: (c) Both (a) and (b)
Question 11.
Foreign exchange rate is determined by :
(a) Government
(b) Bargaining
(c) World Bank
(d) Demand and Supply forces
Answer
Answer: (d) Demand and Supply forces
Question 12.
By exchange rate we mean :
(a) How much local currency we have to pay for a foreign currency
(b) How much of a foreign currency we have to pay for another foreign currency
(c) The rate at which foreign currency is bought and sold
(d) All of these
Answer
Answer: (d) All of these
Question 13.
Balance of Trade = ?
(a) Export of Visible Items – Imports of Visible Items
(b) Export of both Visible and Invisible Items – Import of both Visible and Invisible Items
(c) Import of Visible Items – Export of Visible Items
(d) None of the above
Answer
Answer: (a) Export of Visible Items – Imports of Visible Items
Question 14.
Which items are included in Balance of Payments ?
(a) Visible Items
(b) Invisible Items
(c) Capital Transfers
(d) All the above
Answer
Answer: (d) All the above
Question 15.
Which one is the visible item of Balance of Payments ?
(a) Machine
(b) Cloth
(c) Cement
(d) All of these
Answer
Answer: (d) All of these
Question 16.
Which one is the invisible item of Balance of Payment ?
(a) Banking
(b) Shipping
(c) Communication
(d) All of these
Answer
Answer: (d) All of these
Question 17.
Which one is the feature of Balance of Payment ?
(a) Systematic Accounts
(b) Fixed Time Period
(c) Comprehensiveness
(d) All the above
Answer
Answer: (d) All the above
Question 18.
Which account is included in the composition of Balance of Payments ?
(a) Current Account
(b) Capital Account
(c) Both (a) and (b)
(d) None of the above
Answer
Answer: (c) Both (a) and (b)
Question 19.
Which one is the item of Current Account ?
(a) Import of Visible Items
(b) Expenses of Tourists
(c) Exports of Visible Items
(d) All the above
Answer
Answer: (d) All the above
Question 20.
Which one is the item of Capital Account ?
(a) Government Transaction
(b) Priva Transactions
(c) Foreign Direct Investment
(d) All the above
Answer
Answer: (d) All the above
Question 21.
The component(s) of Balance of Payment is/are:
(a) Current Account
(b) Capital Account
(c) Both (a) and (b)
(d) None of these
Answer
Answer: (c) Both (a) and (b)
Question 22.
Which items are included in balance of trade ?
(a) Invisible Item
(b) Capital Transfer
(c) Visible Item
(d) All of these
Answer
Answer: (c) Visible Item
Question 23.
Balance of Trade means :
(a) Capital Transaction
(b) Import and export of goods
(c) Total debit and credit
(d) All the above
Answer
Answer: (b) Import and export of goods
Question 24.
The reason of imbalance in balance of payment is :
(a) Natural Reasons
(b) Economic Reasons
(c) Political Reasons
(d) All of these
Answer
Answer: (d) All of these
Question 25.
Structure of balance of payment includes which account:
(a) Current account
(b) Capital account
(c) Both (a) and (b)
(d) None of these.
Answer
Answer: (c) Both (a) and (b)
Question 26.
Balance of trade means :
(a) Capital transactions
(b)Import and export of goods,
(c) Total credit and debit
(d) All of the above.
Answer
Answer: (b)Import and export of goods,
Question 27.
Measures to improve adverse balance of payment includes :
(a) Currency devaluation
(b) Import substitution
(c) Exchange control
(d) All of the above.
Answer
Answer: (d) All of the above.
Question 28.
Foreign Exchange Rate is determined by :
(a) Demand of foreign currency
(b) Supply of foreign currency
(c) Demand and supply in foreign exchange market
(d) None of these.
Answer
Answer: (c) Demand and supply in foreign exchange market
Question 29.
Types of Foreign Exchange Market are :
(a) Spot market
(b) Forward market
(c) Both (a) and (b)
(d) None of these.
Answer
Answer: (c) Both (a) and (b)
Fill in the blanks:
1. Bretton woods system is also known as ………………… border system.
Answer
Answer: Adaptable
2. There is ………………… relation between foreign exchange rate and the supply of foreign exchange.
Answer
Answer: Direct
3. By devaluation, the value of currency …………………
Answer
Answer: Reduces
4. ………………… items are included in the balance of trade.
Answer
Answer: Visible
5. Balance of payment always remains …………………
Answer
Answer: Balanced
6. The value of currency of one country with that of the currency of another country is called …………………
Answer
Answer: Exchange rate
State true or false:
1. Balance of trade includes both visible and invisible items.
Answer
Answer: False
2. Balance of trade is a part of Balance of payments.
Answer
Answer: True
3. Devaluation is declared by the government.
Answer
Answer: True
4. Balance of payment is always balanced.
Answer
Answer: True
5. For export promotion, help of devaluation is taken.
Answer
Answer: True
6. The increasing population in developing countries has direct impact on economic growth.
Answer
Answer: False
7. Export promotion is one of the ways of correcting Balance of payments.
Answer
Answer: False
Match the following:
| ‘A’ | ‘B’ |
| 1. Balance of payments | (a) Always favourable |
| 2. Balance of Trade includes | (b) Both visible and invisible items |
| 3. India’s Balance of payments | (c) Includes only visible items |
| 4. Determination of flexible exchange rate | (d) Foreign banks issue letter of credit in large demand over banks of the country |
| 5. In favour of foreign exchange rate | (e) Forces of demand and supply in foreign exchange markets. |
Answer
Answer:
| ‘A’ | ‘B’ |
| 1. Balance of payments | (b) Both visible and invisible items |
| 2. Balance of Trade includes | (c) Includes only visible items |
| 3. India’s Balance of payments | (a) Always favourable |
| 4. Determination of flexible exchange rate | (e) Forces of demand and supply in foreign exchange markets. |
| 5. In favour of foreign exchange rate | (d) Foreign banks issue letter of credit in large demand over banks of the country |