Practice test

Balance of payments - Test Set 1

Review 20 exam-focused questions with detailed explanations, then start the interactive test when you are ready.

20 questions

Questions and explanations

  1. Question 1

    A part of National Debt known as External Debt is the amount:
    1. Borrowed by its citizen from abroad
    2. Lent by its citizens to foreign governments
    3. Borrowed by its government from abroad
    4. Lent by its government to foreign government
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  2. Question 2

    The process of organizing business-pact between group of countries is called as—
    1. Trading Block
    2. Trade venture
    3. Trade Partner
    4. Trade organizer
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  3. Question 3

    The practice of selling goods in a foreign country at a price below their domestic selling price is called—
    1. Diplomacy
    2. Discriminator
    3. Dumping
    4. Double pricing
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  4. Question 4

    “Full convertibility of a rupee” means—
    1. Purchase of foreign exchange for rupees only
    2. Payment for imports in terms of rupees
    3. Repayment of loans in terms of rupees
    4. Determination of rate of exchange between rupee and foreign currencies freely by the market forces of demand and supply.
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  5. Question 5

    The Full form of SDR is—
    1. Special Dollar Rights
    2. Special Drawing Rights
    3. State Drawing Rights
    4. Specific Dollar Right
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  6. Question 6

    Buying of shares and bonds of Indian companies by foreign institutions is called—
    1. Foreign Direct Investment
    2. Portfolio Investment
    3. Institutional Investment
    4. Foreign Indirect Investment
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  7. Question 7

    Private investment is otherwise called as—
    1. Autonomous investment
    2. Foreign institutional investment
    3. Foreign direct investment
    4. Induced investment
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  8. Question 8

    The annual record for all the monetary transactions of a country with other countries of the world is known as—
    1. Balance of Trade
    2. Balance of Monetary Receipts
    3. Balance of Payments
    4. Balance Sheet
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  9. Question 9

    India’s Balance of Payments can be corrected through—
    1. Devaluation of currency
    2. Vigorous export promotion
    3. Import substitution
    4. All of the above
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  10. Question 10

    Which one of the following items is not included in the current account of India’s Balance of Payments?
    1. Short-Term Commercial Borrowings
    2. Non-Monetary Gold Movements
    3. Investment Income
    4. Transfer Payments
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  11. Question 11

    When there is an official change in the exchange rate of domestic currency, then it is called—
    1. Appreciation
    2. Depreciation
    3. Revaluation
    4. Deflation
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  12. Question 12

    At present, India is following:
    1. Fixed exchange Rate
    2. Floating exchange Rate
    3. Pegged up exchange Rate
    4. Pegged down exchange Rate
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  13. Question 13

    The outcome of ‘devaluation of currency’ is—
    1. Increased export and improvement in balance of payment
    2. Increased export and foreign reserve deficiency
    3. Increased import and improvement in balance of payment
    4. Increased export and import
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  14. Question 14

    The Government resorts to devaluation of its currency in order to promote—
    1. National Income
    2. International Goodwill
    3. Exports
    4. Savings
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  15. Question 15

    Devaluation makes import—
    1. Competitive
    2. Inelastic
    3. Cheaper
    4. Dearer
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  16. Question 16

    When did the rupee become a freely convertible currency on Current Account in India?
    1. 2000
    2. 2001
    3. 1994
    4. 1999
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  17. Question 17

    Devaluation usually causes the internal prices to—
    1. Fall
    2. Rise
    3. Remain unchanged
    4. None of the above
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  18. Question 18

    Floating Exchange Rate is also referred to as—
    1. Flexible Exchange Rate
    2. Fixed Exchange Rate
    3. Real Exchange Rate
    4. Controlled Exchange Rate
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  19. Question 19

    Which one of the following does not deal with export promotion?
    1. Trade Development Authority
    2. Minerals and Metals Trading Corporation
    3. Cooperative Marketing Societies
    4. State Trading Corporation of India
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  20. Question 20

    A trade policy consists of-
    1. Export-Import Policy
    2. Licencing Policy
    3. Foreign Exchange Policy
    4. Balance of Payment Policy
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