Practice test

Balance of payments - Test Set 2

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

    The biggest item of India's imports is—
    1. Iron ore
    2. Mica
    3. Petroleum products
    4. Gems and Jewellery
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  2. Question 2

    The difference between visible exports and visible imports is defined as—
    1. Balance of Trade
    2. Balance of Payment
    3. Balanced Terms of Trade
    4. Gains from Trade
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  3. Question 3

    A country's balance of trade is unfavourable when—
    1. Exports exceed imports
    2. Imports exceed exports
    3. Terms of trade become unfavourable
    4. None of the above
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  4. Question 4

    Theoretically trade between two countries takes place on account of—
    1. Difference in Costs
    2. Scarcity of Goods
    3. Comparative Differences in Costs
    4. Need for Exports
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  5. Question 5

    FERA in India has been replaced by—
    1. FEPA
    2. FEMA
    3. FENA
    4. FETA
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  6. Question 6

    One of the main factors that led to rapid expansion of Indian exports is—
    1. Imposition of import duties
    2. Liberalisation of the economy
    3. Recession in other countries
    4. Diversification of exports
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  7. Question 7

    Interest on public debt is part of—
    1. Transfer payments by the enterprises
    2. Transfer payments by the government
    3. National income
    4. Interest payments by households
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  8. Question 8

    What is the revised upper limit for foreign direct investment in telecom service companies?
    1. 49 per cent
    2. 51 per cent
    3. 66 per cent
    4. 74 per cent
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  9. Question 9

    Canalised list of items in foreign trade on India refers to—
    1. The items to be imported by the private agencies
    2. List of items to be subsidised
    3. List of items to be granted duty concession
    4. Items to be imported only by the State owned undertaking
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  10. Question 10

    Which of the following does not form a part of the foreign exchange reserves of India?
    1. Gold
    2. SDRs
    3. Foreign currency assets
    4. Foreign currency and securities held by the banks and corporate bodies
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  11. Question 11

    How the interest-level of a country is affected by FDI?
    1. Increases
    2. Decreases
    3. Remains unaffected
    4. There is increase or decrease
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  12. Question 12

    Disinvestments is-
    1. Offloading of shares of privates companies to government
    2. Offloading of government shares to private companies
    3. Increase in investment
    4. closing down of business concerns
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  13. Question 13

    Foreign currency which has a tendency of quick migration is called-
    1. Scarce currency
    2. Soft currency
    3. Gold currency
    4. Hot currency
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  14. Question 14

    Devaluation of currency leads to-
    1. Expansion of export trade
    2. Contraction of import trade
    3. Expansion of import substitution
    4. All of the above
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  15. Question 15

    Under flexible exchange rate system, the exchange rate is determined by-
    1. The Central Bank of the country
    2. The forces of demand and supply in the foreign exchange market
    3. The price of gold
    4. The purchasing power of currencies
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  16. Question 16

    A currency having a falling exchange rate due to continuing balance of payments deficit is called a-
    1. Soft currency
    2. Hard currency
    3. Scarce currency
    4. Surplus currency
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  17. Question 17

    Funds which flow into a country to take advantage of favourable rates of interest in that country is called-
    1. Cold Money
    2. Black Money
    3. Hot Money
    4. White Money
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  18. Question 18

    The purpose of devaluation is to:
    1. Be little foreign currencies
    2. Encourage export
    3. Discourage export
    4. Encourage import
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  19. Question 19

    Pegging up of a currency means, fixing the value of a currency-
    1. At a constant level
    2. At a lower level
    3. At a higher level
    4. Leaving at market forces
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  20. Question 20

    A favourable Balance of Trade of a country implies that-
    1. Imports are greater than Exports
    2. Exports are greater than Imports
    3. Both Imports and Exports are equal
    4. Rising Imports and Falling Exports
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