This quiz works best with JavaScript enabled. Home > Economics > International > Bop > Balance Of Payments – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Balance Of Payments Quiz 1 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Qhat is the relationship between demand for foreign exchange and exchange rate? A) No relationship. B) One to one. C) Inverse. D) Direct. Show Answer Correct Answer: C) Inverse. 2. If balance of Trade is (-) 600 crore and the value of exports is 500 crore. then what will be the value of imports. A) 1, 200 crore. B) 1, 300 crore. C) 300 crore. D) 1, 100 crore. Show Answer Correct Answer: D) 1, 100 crore. 3. The purchase of an overseas company by a Singapore firm. A) Debit entry in Current a/c. B) Debit entry in Capital a/c. C) Credit entry in Capital a/c. D) Credit entry in current a/c. Show Answer Correct Answer: B) Debit entry in Capital a/c. 4. Payments of profits by a Japanese-owned firm in Australia to its parent company in Tokyo. A) Debit entry in Capital & FInancial a/c. B) Debit entry in Current Account. C) Credit entry in Current a/c. D) Credit entry in Capital & Financial a/c. Show Answer Correct Answer: B) Debit entry in Current Account. 5. A country is running a persistent trade deficit. The most likely effect of this is to A) Reduce consumer spending on imported products. B) Cause an appreciation in the value of the exchange rate. C) Cause a rise in employment in export industries. D) Reduce the level of aggregate demand. Show Answer Correct Answer: D) Reduce the level of aggregate demand. 6. The Balance of Account should always equal A) A positive number. B) A negative number. C) Zero. D) None of above. Show Answer Correct Answer: C) Zero. 7. Loans raised overseas which finance corporate takeovers in Australia are: A) Credits on the capital account. B) Credits on the current account. C) Debits on the capital account. D) None of above. Show Answer Correct Answer: A) Credits on the capital account. 8. Exports = rupees 1000 lakh imports = 16 50 lakh, balance of trade shows A) Surplus of rupees 650 lakh. B) Deficit of rupees 650 lakh. C) Balance of rupees 2650 lakh. D) None of these. Show Answer Correct Answer: B) Deficit of rupees 650 lakh. 9. Mr. Leroy Jenkins buys shares in a Japanese video game company. This transaction would be recorded in the, A) Current account. B) Financial account. C) Official reserves. D) None of above. Show Answer Correct Answer: B) Financial account. 10. USA tourist purchases cheese in France as a souvenir. How would this transaction be recorded in the US BoP? A) Current Ac inflow. B) Current Ac Outflow. C) Financial Ac outflow. D) Financial Ac inflow. Show Answer Correct Answer: B) Current Ac Outflow. 11. An increase value of a currency in a free floating exchange system A) Revaluation. B) Devaluation. C) Appreciation. D) Depreciation. Show Answer Correct Answer: C) Appreciation. 12. Which policy would be most likely to reduce a balance of payments current account deficit? (Winter 2005) A) B reducing subsidies to domestic industries. B) D reducing the level of tariffs. C) A reducing income tax rates. D) C reducing the external value of the currency. Show Answer Correct Answer: D) C reducing the external value of the currency. 13. ..... is the cross-border purchase of assets that are then managed in a way that hides the movement of money and its ownership. A) Capital mobility. B) Irrational exuberance. C) Money laundering. D) Capital flight. Show Answer Correct Answer: C) Money laundering. 14. The Law of Comparative Advantage states that countries should specialise in the production of goods and services that they have ..... than their trading partners. A) Higher opportunity cost. B) Lower opportunity cost. C) Higher per unit costs. D) Lower per unit costs. Show Answer Correct Answer: B) Lower opportunity cost. 15. Which of the following actions by local consumers can negatively impact their country's BOP? A) Importing high quality goods and services. B) Exporting goods and services. C) Investing abroad. D) Investing locally. Show Answer Correct Answer: A) Importing high quality goods and services. 16. Balance of trade is Rs (-) 150crs and value of exports are Rs 350 crs.In this case value of imports will be A) Rs 400 crs. B) Rs 200crs. C) Rs 500crs. D) Rs 300crs. Show Answer Correct Answer: C) Rs 500crs. 17. Unilateral transfers are A) One sided payments. B) Reciprocal payments. C) Factor incomes. D) None of these. Show Answer Correct Answer: A) One sided payments. 18. Which of the following Functions are performed in a foreign exchange market? A) Transfer Functions. B) Creadit Functions. C) Hedging function. D) All of these. Show Answer Correct Answer: D) All of these. 19. As currency appreciates a trade surplus A) Increases. B) Decreases. C) Stays the same. D) None of above. Show Answer Correct Answer: B) Decreases. 20. ..... is a situation when 'managed floating' is exercised by the central bank. A) Crawling peg. B) Spot market. C) Dirty Floating. D) None of these. Show Answer Correct Answer: C) Dirty Floating. 21. A company located in India receives a loan from a company located abroad. How is this transaction recorded in India's balance of payments account? A) Debit side of current account. B) Credit side of current account. C) Credit side of capital account. D) Debit side of capital account. Show Answer Correct Answer: C) Credit side of capital account. 22. Payments of dividends by a foreign firms to Belgians. A) Debit in Belgian Current a/c. B) Credit in Belgian Capital a/c. C) Credit in Belgian Current a/c. D) Debit in Belgian Capital a/c. Show Answer Correct Answer: C) Credit in Belgian Current a/c. 23. How is spending by tourists visiting the UK recorded in the BoP? A) As an income credit in the current account. B) As a service debit in the current account. C) As a service credit in the capital account. D) As a service credit in the current account. Show Answer Correct Answer: D) As a service credit in the current account. 24. When currency depreciates imports become more A) Stays the same. B) Cheaper. C) Expensive. D) None of above. Show Answer Correct Answer: C) Expensive. 25. The purchase and sale of stocks, bonds, real estate and businesses relate to which account? A) Current Account. B) Capital Account. C) Errors and Omission Section. D) Balance of Trade Section. Show Answer Correct Answer: B) Capital Account. 26. Payments of profits by a Japanese firm in Singapore to its parent company in Tokyo. A) Credit entry in capital a/c. B) Credit entry in current a/c. C) Debit entry in current a/c. D) Debit entry in capital a/c. Show Answer Correct Answer: C) Debit entry in current a/c. 27. When Balance of payments Balance A) Current account + capital account = zero. B) Official reserve account is a part of current account. C) Official reserve account is a part of capital account. D) Both a and c. Show Answer Correct Answer: D) Both a and c. 28. Which of the following items are not a part ofcapital account? A) Banking capital transactions. B) Loans. C) Unilateral transactions. D) Portfolio investment. Show Answer Correct Answer: C) Unilateral transactions. 29. In which of the following categories are there transactions of balance of trade recorded? A) Visible items. B) Invisible items. C) Capital transfers. D) All of these. Show Answer Correct Answer: A) Visible items. 30. Japanese tourists visit the USA and buy some BBQ ribs. A) Debit in US Capital a/c. B) Credit in US Current a/c. C) Credit in US Capital a/c. D) Debit in US Current a/c. Show Answer Correct Answer: B) Credit in US Current a/c. 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