Deck 6: International Finance and Balance of Payments

Question 1

A country which gives loans and grants on a large scale to other countries has

A)A surplus in its BOP on capital account
B)A deficit in its BOP on capital account
C)A surplus in its BOP on current account
D)A deficit in its BOP on its current account

Answer 1

A deficit in its BOP on capital account

Question 2

'twin deficits' refer to revenue deficit and

A)Capital deficit
B)Capital account BoP deficit
C)Current account BoP deficit
D)None of the above

Answer 2

Current account BoP deficit

Question 3

Measurement of deficit or surplus in the balance of payments in in international transaction is in a given year is

A)Balance of payments
B)Balance of trade
C)Transfer payments to foreigners
D)None of the above

Answer 3

Balance of payments

Question 4

Overvaluation of domestic currency makes

A)Foreign goods cheaper and exports dearer in foreign countries
B)Foreign goods dearer and exports cheaper in foreign countries
C)Domestic goods cheaper and foreign goods dearer
D)None of the above

Question 5

Devaluation encourage

A)Exports
B)Imports
C)Both exports and imports
D)None of the above

Question 6

A systematic record of receipts and payments in international transactions of a country in a given year is called

A)Balance of trade
B)Balance of payments
C)Terms of trade
D)Capital account

Question 7

The most important items in the current account are

A)Foreign aid and pensions
B)Private remittances and gifts
C)Merchandise exports and imports
D)Transportation and insurance

Question 8

Lending to foreign countries represents

A)Capital inflows
B)Capital outflows
C)Services outflows
D)Services inflows

Question 9

Payment to foreign country is a

A)Credit transaction
B)Debit transaction
C)Internal transaction
D)External transaction

Question 10

The category that do not includes in the balance of payments account is/are

A)The current account
B)The capital account
C)The official settlements account
D)The savings account

Question 11

The expression (X-M) denotes

A)The balance of trade
B)The balance of payments
C)The domestic trade
D)None of the above

Question 12

If the difference between exports and imports is zero

A)Balance of trade balances
B)Balance of payments balances
C)Capital account equals current account
D)None of the above

Question 13

The current account BOP deficit will be beneficial for the economy if foreign borrowings are used to finance

A)Transportation
B)Shipping goods
C)Real investment
D)Small and medium enterprises

Question 14

In the equation Y=C+I+G+(X-M), G denotes

A)General expenditure
B)Government expenditure
C)Expenditure on gold
D)Expenditure on goods

Question 15

If export is less than import, there is a ….. in balance of trade.

A)Surplus
B)Deficit
C)Favourable
D)Balance

Question 16

In the equation B=Rf-Pf, Pf represents

A)Payments made by foreigners
B)Payments made to foreigners
C)Payments made to residents of a country
D)Payments made to exporters

Question 17

The difference between exports and imports of a country is its

A)Balance of visible trade
B)Balance of invisible trade
C)Balance of payments
D)None of the above

Question 18

Under direct control measures, the government aims at limiting

A)The volume of imports
B)The volume of exports
C)Both imports and exports
D)None of the above

Question 19

Given the foreign exchange rate and prices in a country, an increase in the value of exports causes an increase in

A)Expenditures
B)Incomes
C)Investments
D)Employment

Question 20

Devaluation results in

A)Increase in domestic price of imports and decrease in foreign price of exports
B)Increase in foreign price of exports and decrease in domestic price of imports
C)Decrease in domestic price of imports and increase in foreign price of exports
D)None of the above

Question 21

Undervaluation of currency encourages

A)Imports
B)Exports
C)Investments
D)None of the above

Question 22

The equation Rf-Pf <0 denotes

A)Surplus in balance of payments
B)Deficit in balance of payments
C)Equilibrium in balance of payments
D)None of the above

Question 23

Imports in balance of payments account are shown as a

A)Negative item
B)Positive item
C)Invalid item
D)None of the above

Question 24

Which of the following account does not included in the Reserve account?

A)IMF
B)SDR
C)Reserve and monetary gold
D)Savings

Question 25

Exchange rate depreciation reduces

A)The value of home currency in relation to foreign currency
B)The value of foreign currency in relation to a home currency
C)Both the values of home currency and foreign currency
D)None of the above