Practice test

Balance of payments - Test Set 3

Review 14 exam-focused questions with detailed explanations, then start the interactive test when you are ready.

14 questions

Questions and explanations

  1. Question 1

    Countries that depend mainly on the export of primary products for their income, are prone to:
    1. Inflation
    2. Economic instability
    3. Increasing unemployment
    4. Stable economic growth
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  2. Question 2

    The balance of payments of a country is in equilibrium when the-
    1. Demand as well as supply of the domestic currency are the highest
    2. Demand for the domestic currency is equal to its supply
    3. Demand for the domestic currency is the highest
    4. Demand for the domestic currency is the lowest
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  3. Question 3

    In the balance of payments account, unrequited receipts and payments are also regarded as-
    1. Bilateral transfers
    2. Unilateral transfers
    3. Capital accounts transfers
    4. Invisible transfers
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  4. Question 4

    As a result of higher rate of inflation in India, the U.S. dollar will-
    1. Depreciate
    2. Constant
    3. Negligible
    4. Appreciate
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  5. Question 5

    Which type of foreign investment is considered as unsafe?
    1. Foreign Direct Investment (FDI)
    2. Portfolio Investment
    3. NRI deposits
    4. External commercial borrowing
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  6. Question 6

    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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  7. Question 7

    Excise duty is levied on-
    1. Sale of goods
    2. Production of goods
    3. Import of goods
    4. Export of goods
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  8. Question 8

    Lowering of value of currency relative to a foreign reference currency is called ______-
    1. Devaluation
    2. Revaluation
    3. Down valuation
    4. Negative valuation
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  9. Question 9

    Balance of Trade is the difference between-
    1. Country’s Income and Expense
    2. Country’s Exports and Imports
    3. Country’s tax Revenus and Expense
    4. Country’s capital inflow and outflow
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  10. Question 10

    Which among the following is not an account under Balance of Payment?
    1. Current Account
    2. Capital Account
    3. Official Reserves Account
    4. Unilateral Payments Account
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  11. Question 11

    The ______ exchange rate is the relative price of foreign goods in terms of domestic goods.
    1. Artificial
    2. Nominal
    3. Fixed
    4. Real
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  12. Question 12

    The ______ exchange rate is the price of one unit of foreign currency in terms of domestic currency.
    1. Artificial
    2. Nominal
    3. Fixed
    4. Real
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  13. Question 13

    What is the full form of FDI?
    1. Foreign Direct Input
    2. Foreign Direct Investment
    3. Fiscal Direct Investment
    4. Fiscal Direct Input
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  14. Question 14

    Foreign investment is known by which name in India?
    1. SME (Small and medium-sized enterprises)
    2. MDI (Management Development Institute)
    3. FDI (Foreign Direct Investment)
    4. CII (Confederation of Indian Industry)
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