International Economics Set 3
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This set of International Economics Multiple Choice Questions & Answers (MCQs) focuses on International Economics Set 3
Q1 | _________________ is an open position in the market with an expectation of gainsthrough the fluctuations.
- hedging
- speculation
- arbitrage
- non of the above
Q2 | Under a fixed exchange rate system, ____________________are official changes inthe value of a country's currency relative to other currencies.
- devaluation
- depreciation and appreciation
- revaluation
- both a and c.
Q3 | __________ is the deliberate downward adjustment in the official exchange rate,reduces the currency's value.
- devaluation
- depreciation
- revaluation
- appreciation. 56. a _______________is an upward adjustment in the official exchange rate, which
Q4 | A key effect of devaluation is that it
- makes the domestic currency cheaper relative to other currencies.
- makes the domestic currency dearer relative to other currencies.
- makes the foreign currency cheaper relative to other currencies.
- leaves the relative value unchanged.
Q5 | Devaluation leads to
- increasing the price of imports and stimulating greater demand for domestic products.
- domestic inflation.
- rise in domestic interest rates.
- all the above
Q6 | Recardo’s Law of Comparitive advantage is based on
- labour theory of value
- opportunity cost
- law of diminishing returns
- all the above
Q7 | The exchange rate system that is followed in India is
- fixed exchange rate system
- flexible exchange rate system
- managed float system
- non of the above
Q8 | Pure theory of international trade is termed so because
- it is based on unrealistic assumptions
- it concentrates on static gains
- monetary approaches are absent in them
- it is based on deductive reasoning
Q9 | Which among the following is true with regard to the PPP theory?
- greater transportation costs and trade restrictions are between countries, the less likely for the costs of market baskets to be equalized.
- costs of non tradable inputs are not taken into consideration by ppp.
- it is based on the concept of law of one price
- all the above
Q10 | law of one price prevails when
- transportation costs, barriers to trade (import-export levies, customs dutyet c) and other transaction costs (currency conversion fee) are insignificant.
- there must be competitive markets for the goods and services in both countries.
- the loop applies only to tradable goods. loop is not applicable to immobile goods such as houses and many services that are local in nature.
- all the above
Q11 | ______________ is a summary statement of all economic transactions of the residents of a nation with the residents of Rest of the World (ROW) during aparticular period of time.
- balance of payment
- capital account
- official reserve account
- net exports
Q12 | Which among the following are differences between Balance of Trade andBalance of Payment?
- balance of trade is defined as \difference between export and import of goods and services\ while balance of payment includes not only import and export of goods and services but also financial / capital transfer.
- bot = net earning on exports - net payment made for imports while bop = current account + capital account + or - balancing item ( errors and omissions)
- bot need not be in balance always while bop needs to be in balance
- all the above
Q13 | If Debit balance in the balance of payment accounts are greater than the Creditbalance it leads to
- balance of payment surplus.
- balance of payment deficit
- chronic disequilibrium in bop
- non of the above
Q14 | When each international transaction undertaken by the residents of a country areentered as a debit and credit entry of equal size, into the balance of payments, the method is known as.
- balance ot trade
- balance of payment
- double entry bookkeeping
- non of the above
Q15 | Which among the following best explains the difference between Trade inInvisibles and merchandise trade?
- invisible trade is much more hetnogenious than the merchandise.
- invisibles trade includes shipping, banking and insurance services and payments by residents as tourists abroad. trade in merchandise include the export and import of goods only.
- the net of exports and import of visible in balance of payment accounts is called the merchandise trade balance. the net of exports and import of invisibles or services in balance of payment accounts is called the services trade balance.
- all the above.
Q16 | _______________are receipts which the residents of a country receive for free,without making any present or future service transaction in return.
- grants
- external borrowings
- unilateral transfers
- non of the above
Q17 | The _______________ records all international financial transactions that involve resident of the country concerned- changing either his assets with or his liabilitiesto a resident of another country.
- current account
- capital account
- official reserve account
- unilateral transfers.
Q18 | Official reserves consist of
- gold,
- special drawing rights (sdrs) borrowed from the imf,
- holding of foreign convertible currencies.
- all the above
Q19 | Distinguish between autonomous and accommodating items in the balance of payments.
- all transactions in the current and capital account are called automatic transactions. accommodating items are transactions that come under the official reserve account.
- transactions are said to be autonomous if their value is determined independently of the balance of payments. accommodating items are determined by the net consequences of the autonomous items.
- they take place for business or private motive. accommodating items are required to balance international transactions.
- all the above
Q20 | Which among the following sentence is NOT true
- items are said to be above the line (autonomous) or below the line (accommodating).
- the sum of the accommodating and autonomous items must be zero, since all entries in the balance of payment s accounts must come under one of the tw3o headings.
- a surplus in a nation’s balance of payments is given by a net debit balance in the nation’s autonomous items and a deficit is given by a net credit balance.
- b o p is a systematic statistical statement or record of the character and dimensions of the country’s economic relationship with the rest of the world.
Q21 | Which among the following is NOT a measure to correct the balance of paymentdisequilibrium?
- devaluation
- deflation
- revaluation
- non of the above
Q22 | Tariffs are
- taxes imposed on imports.
- taxes imposed on the consumption of domestic goods
- taxes imposed on the consumption of imported services.
- taxes imposed on the consumption of domestic services.
Q23 | When tariffs are imposed
- the prices of imports would increase to the extent of tariff.
- the prices of imports would decrease to the extent of tariff.
- the prices of imports would increase by a multiplier of tariff
- the prices of imports would decrease by a multiplier of tariff
Q24 | What are the major drawbacks of tariffs
- they are restrictions to free trade
- tariffs seek to establish equilibrium without removing the root causes of disequilibrium.
- tariffs bring equilibrium by reducing the volume of trade.
- all the above
Q25 | Which of the following statement is true
- a depreciation is likely to correct a deficit in bop when the demand for and supply of foreign exchange is more elastic
- a depreciation is likely to correct a deficit in bop when the demand for and supply of foreign exchange is less elastic
- a depreciation is likely to correct a deficit in bop when the demand for foreign exchange is more elastic and the and supply of foreign exchange is less elastic
- non of the above